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Buffett Hits $2 Billion Jackpot With Goldman

Warren Buffett just made a quick $2 billion. Who says he's losing his step?

In the midst of the credit crisis, just as Lehman collapsed and Merrill Lynch & Co. was going through a Bank of America (JPM - Get Report) emergency takeover, Goldman Sachs (GS - Get Report) turned to Buffett for help.

The company offered to sell the Oracle of Omaha's Berkshire Hathaway (BRK.A - Get Report) $5 billion in preferred shares with warrants paying 10% interest. Bloomberg now reports that this deal has paid off in billions.

Because of the volatile economic environment at the time, the deal was proposed, Buffett demanded that Goldman add an incentive in the form of warrants that allowed him to purchase GS common stock at $115 per share at any time in the next four years.

Today, Goldman's share price passed $164 in New York trading for the first time since Lehman went bankrupt in September. If Buffett were to redeem the warrants and sell them at this price the difference between today's price and the strike price translates into a hefty $2 billion plus profit for his shareholders.

Berkshire Hathaway, whose first-quarter losses proved that it has not been exempt from the recent economic downturn, benefited from the news. The company's shares gained almost 3% on the NYSE during Thursday and Friday's trading.

Buffett has made a name for himself investing in companies with sustainable competitive advantages. These "wide moat" companies include names such as Goldman Sachs, American Express (AXP - Get Report), and Coca-Cola (KO - Get Report).

Investors looking for access to these companies but lack the funds necessary to pay the almost $95,000 price tag for Berkshire Hathaway stock may want to take a look at Elements Morningstar Wide Moat Focus ETN (WMW). Interestingly, WMW's positive 23% year-to-date returns have beat Berkshire Hathaway, which is basically flat for 2009.
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WMW $22.73 1.25%
AXP $65.68 0.38%
BRK.A $220,252.50 0.57%
GS $166.18 1.26%
JPM $63.79 0.93%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

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