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Can Buffet’s Vote of Confidence Outdo The Fed’s?

Posted on | September 24, 2008 Time: 1:48 am |

Mr. Buffett finally stepped into the financial waters late today, investing $5 billion into Goldman Sachs (GS) in exchange for preferred shares (with a 10% dividend) and warrants for another $5 billion worth, good for 5 years at $115/share. Once again, Warren was able to demand deal terms that would get anyone else laughed out of the room before snacks were served.

Besides this post being a testament, a tip of the hat to the greatest capitalist of our time, I highlight the deal because Goldman proceeded to jump over 10% in after-hours trading. This means that the planned $2.5 equity issuance Goldman buried with the Buffett lead just earned them a few hundred million more, partly on the capital infusion but mainly on “the Name”.

Barring another day of mere dog-and-pony antics from Congress, the news of Buffett stepping in could provide the needed boost of confidence that really hasn’t returned to the market since early Friday when the government deal was first struck. Goldman shares were picked up last week for the Secular Trends Portfolio, so hopefully the bottom on this stock has already passed us by.

Buffett’s quote on Goldman:

“Goldman Sachs is an exceptional institution…It has an unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance”

To review the Secular Trends Portfolio thesis for Goldman Sachs

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