This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Warren Buffett's Elephant Gun Could Target Utilities Deals

NEW YORK ( TheStreet) -- Did Warren Buffett give a not so subtle hint that his "elephant gun" is targeting utilities, a sector where Berkshire Hathaway's (BRK.A) MidAmerican Energy is already one of the largest players in the U.S.?

Buffett fanned speculation at last weekend's Berkshire Hathaway annual meeting about another big acquisition when he said Berkshire had come close to cutting a $22 billion deal during the last quarter of 2011. Buffett said that the deal fell apart because of a disagreement on price and his unwillingness to sell any of his stock investments, nevertheless, he expressed confidence that in the future Berkshire will be able to bag M&A prey as large or larger than Berkshire's $26.5 billion acquisition of Burlington Northern Santa Fe.

Buffett's elephant gun is nothing new, and the never-ending question is what companies could Berkshire buy?

Warren Buffett

The universe of potential deals to speculate over is expansive, given Berkshire's financial might and the number of sectors in which the company already has exposure and a predilection for deals. However, Buffett's statement that the firm is looking to invest $100 billion in MidAmerican Energy may be worth a focus.

Investing Berkshire Hathaway's cash faster than the company generates it has become a major issue for Warren Buffett as Berkshire's cash stockpile sits at above $37 billion and the company draws in $1 billion a month in free cash flow. This cash "problem" has spurred the legendary value investor to put his money behind consistent-returning but capital intensive businesses like railroad BNSF in 2010 and chemicals giant Lubrizol in 2011.

It is also behind the comment made by Berkshire Hathaway vice chairman Charlie Munger at the shareholder meeting, "MidAmerican Energy may have an opportunity to deploy as much as $100 billion over the next 10 to 15 years at very reasonable rates." Much of that spending is likely to consist of capital expenditures, but the $100 billion estimate leaves room for strategic deals, and the figure came as one of the biggest surprises to Berkshire watchers at the shareholder meeting.

"That was far north of what I would have previously estimated," says Tom Lewandowski, an analyst with Edward Jones, adding, "Regulated returns are pretty attractive."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
PGC $21.10 0.00%
AAPL $127.60 0.00%
FB $83.09 0.00%
GOOG $535.38 0.00%
TSLA $205.27 0.00%


DOW 18,034.93 +208.63 1.17%
S&P 500 2,100.40 +19.22 0.92%
NASDAQ 4,994.6020 +62.7870 1.27%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs