Board-Ansicht
Mix-Ansicht- Was macht eigentlich Warren B.? - Lullaby, 08.04.2003, 14:15
- mit Amazon.com! - Philipp Steinhauer, 08.04.2003, 15:26
mit Amazon.com!
-->Buffett Lauds Amazon's 'Courage,' Then Buys Its Junk (Update2)
2003-04-07 12:24 (New York)
Buffett Lauds Amazon's 'Courage,' Then Buys Its Junk (Update2)
(Updates the share price in the 20th paragraph.)
Omaha, Nebraska, April 7 (Bloomberg) -- Billionaire investor
Warren Buffett praised Amazon.com Inc. last July for its decision
to account for stock options as an expense, saying it took
``particular courage'' and would be ``recognized and remembered.''
A week later, Buffett bought $98.3 million of the company's junk
bonds.
Buffett's Geico Corp., the auto insurance unit of his
Berkshire Hathaway Inc., stands to make a $16.4 million profit on
the investment in high-risk, high-yield debt if Amazon.com, the
world's largest Web merchant, repurchases the 10 percent senior
notes next month, as some analysts predict. That would be an
almost 17 percent return for an investor who avoided Internet
investments during the 1990s boom in technology shares.
If Buffett hits his payday, he will have demonstrated --
again -- his ability to make money at a time when he considers
stocks overpriced. Berkshire boosted its junk bond holdings six-
fold in 2002 to $8.3 billion, buying securities in industries that
the billionaire has previously shunned, including
telecommunications.
``It just proves again that Buffett is usually one step ahead
of everyone else,'' said Jake Dollarhide, a money manager at
Fredric E. Russell Investment Management Co., which owns about 700
Berkshire shares, mostly of the Class B stock.
Geico, whose portfolio is controlled by Louis Simpson, bought
109,239 of the 10 percent discount notes for $900 per $1,000 face
amount, according to a filing with the National Association of
Insurance Commissioners, which monitors insurers' financial
reports and solvency.
Buffett's Profit
The bonds are redeemable next month at $1,050 each, which
means Geico's return would be 22 percent on an annualized basis.
The bonds were sold in 1998 with no interest to be paid for
five years. Amazon.com already has redeemed $266 million of the
notes. By calling the remaining $264 million, Amazon.com would
eliminate the $26.4 million of annual interest costs it must start
paying in November.
Amazon.com had $1.3 billion of cash and marketable securities
at the end of last year and may repurchase the notes when they are
callable on May 1, analysts said.
``It's probably in Amazon's best interest to redeem the debt
because of the low-interest rate environment,'' said Stephen
Ardizzoni, who helps manage $500 million of high-yield bonds at
SMH Capital Advisors and previously owned Amazon.com bonds.
Buffett also bought $60.1 million of Amazon.com's 6 7/8
percent convertible bonds in August, making Berkshire the second-
largest holder of the issue behind Capital Research and Management
Co., according to Bloomberg data.
Buffett and Bezos
Buffett, who says he uses Amazon.com to buy books, sent
Amazon President and Chief Executive Officer Jeffrey Bezos a
letter in late July praising the company's decision on stock
options. Buffett has championed expensing of options, saying it
will boost investor confidence.
``It took particular courage on your part, and that will be
recognized and remembered,'' Buffett wrote in a July 24, 2002
letter to Bezos that was obtained by Bloomberg News. ``If I could
show my appreciation by stepping up my book orders, I would. But
you're already getting all of my business.''
Buffett and Bezos are no strangers to each other. Both
executives have attended the invitation-only conferences sponsored
annually by investment firm Allen & Co. in Sun Valley, Idaho, in
July, where CEOs hobnob and often forge deals.
Amazon.com spokesman Bill Curry said he was unaware if Bezos
and Buffett spoke at those meetings. Debbie Bosanek, Buffett's
assistant, declined comment on the Amazon.com bonds.
Buffett's investment in Amazon.com debt is a rare move into
the Internet arena for him. Buffett, the world's second richest
man, has stayed away from technology stocks, saying they were too
high priced and that he didn't understand the Web well enough.
`Shareholder Ignorance'
``The number of failures will far outweigh the number of
successes'' among Web companies, Buffett said in April 2000. Six
months later, he said that Internet stock values show that ``the
ability to monetize shareholder ignorance has probably never been
exceeded.''
Buffett's disdain for unprofitable technology companies led
him to look elsewhere for investments. In his 2000 letter to
Berkshire shareholders, he wrote: ``We have embraced the 21st
century by entering such cutting-edge industries as brick, carpet
and paint. Try to control your excitement.''
Last month, Buffett said in the letter that he had been
buying junk bonds and avoiding stocks because they are expensive.
Buffett may have become interested in Amazon.com because it
has begun to improve its finances after posting losses every year
since 1995. The company last year generated $135 million of free
cash flow, or cash from operations minus interest and capital
spending, and sales rose 26 percent to $3.93 billion.
Cutting Losses
For the full year, Amazon.com cut its loss to
$149.1 million, or 39 cents a share, from $567.3 million, or
$1.56. The company's shares rose $1.07 to $27.29 at 12:19 p.m. New
York time in Nasdaq Stock Market trading.
If Seattle-based Amazon.com were to need cash to invest in
its business this year, it could redeem the debt that Buffett
bought and issue new notes at a lower interest rate, said Andrew
Ebersole, a bond analyst at KDP Investment Advisors.
``It certainly makes economic sense,'' he said. ``They are
only earning low single-digits on their cash balances and they're
paying out 10 percent on these notes.''
Buffett, 72, last year steered Berkshire to a record profit
of $4.29 billion as the company's chairman and chief executive.
The results were helped by an increased emphasis on below-
investment grade debt and rising insurance rates.
Buffett Investments
The company bought $90.4 million of bonds of Tyco
International Ltd., the biggest maker of industrial values and
electrical connectors. Tyco is under investigation by the
Securities and Exchange Commission amid charges that its former
chief executive and chief financial officer looted the company of
$600 million.
Berkshire last year bought $72.1 million of bonds of El Paso
Corp., the largest U.S. owner of natural-gas pipelines, according
to the filing with the National Association of Insurance
Commissioners. El Paso last month had a fourth-quarter loss of
$1.74 billion as it recorded costs to settle lawsuits alleging
market manipulation during California's energy crisis.
Some other investments include a $431.2 million loan to
CenterPoint Energy Inc., owner of a dozen Texas power plants.
In telecommunications, Geico bought $63 million in Nextel
Communications Inc. notes and $14 million in preferred stock
issued by the fifth-largest U.S. mobile-phone company. Its
purchases also include $35 million in notes of AOL Time Warner
Inc., the world's largest media company, and debt of AT&T Corp.,
the No. 1 U.S. long-distance provider, valued at $9 million.
In July, Berkshire, along with Longleaf Partners Funds and
Legg Mason Inc., invested $500 million in Level 3 Communications
Inc., the data-network company that has had 19 consecutive
quarterly losses amid an economic slowdown and a glut in fiber
optic capacity.
``It's not out of character,'' Matt Sauer, who helps manage
$15 billion at Oak Value Capital Management, said of Buffett's
recent high-risk debt investments. ``With Buffett, would anything
be out of character to make money?''
--Greg Wiles in San Francisco, (415) 743-3518 or
grwiles@bloomberg.net, through the Princeton newsroom (609) 750-
4500, with reporting by Tom Giles in San Francisco and David Plumb
in New York. Editors: Liedtka, Merz, Mirabella, Henkoff, Liedtka.
>[img][/img]
>
>Laut"Spiegel", der von"Forbes" abgekupfert hat, soll er seinen Reichtum gg. Vj. gesteigert haben.
>Womit? War's sein legendärer Silberschatz? Wer weiß Näheres?
>Hoppel!
Thread gesperrtgesamter Thread:
