Melbourne Cup week is always a big deal for punters, but the action at Flemington was overshadowed by what might be the biggest bet of Warren Buffett’s career – the $US44 billion acquisition of railroad company Burlington Northern.
The Oracle of Omaha even got in on the punting sprit, openly describing it as an “all-in wager on the economic future of the United States,” which isn’t how the man regarded as one of the greatest stock pickers of all time usually describes his investments.
Given we’re all in the punting mood, it’s a great time to have a look at the bets – big and small – that have been placed by the world’s most influential billionaires in recent months.
The huge Burlington Northern deal has been analysed from every angle and it appears Buffett is betting on a number of factors: an improving US economy, increased energy use (Burlington is a big coal carrier) and even carbon reduction (trains have a smaller carbon footprint than road or air transport). Whatever the case, it’s clear that Buffett probably won’t know if he’s ‘won’ his big bet for at least a decade and probably more.
Buffett’s most recent smaller bets have been in the area of healthcare, specifically stakes in Becton Dickinson (a distributor of medical supplies) and the global giant Johnson & Johnson which makes drugs, consumer products and medical devices. Buffett has always been one to profit from emerging trends and it looks like he’s made a well-placed wager on the ageing population.
While Warren was getting all the headlines last week, his old friend Bill Gates was quietly adding to a little bet of his own. During the last few days Gates’ investment vehicles (including his charitable foundation) have bought another million shares in AutoNation, the biggest car retailer in the US. That takes his stake to 13%, worth just over $400 million. As analysts have pointed out, this most recent purchase is a real vote of confidence in the company, given the most recent purchase was made at price more than 40% higher than what he paid for the bulk of his stake.
In the last few weeks, Hong Kong magnate Li Ka-Shing is said to have spent around $US100 million buying shares in Chinese real estate firm Evergrande, which recently listed on the Hong Kong sharemarket in a float that attracted a number of Chinese billionaires. The investment is essentially a bet on the rapidly changing Chinese housing market, as Evergrande is apparently one of the big 10 property developers in mainland China.
Li Ka-Shing’s other little recent punt was to buy a small stake in music streaming service Spotify, a company that has attracted plenty of attention in the tech community. Speculation is now building that Spotify will develop a mobile phone with Hutchison Whampoa, a telco in which Li Kat-Shing also owns a majority stake.
British entrepreneur Richard Branson always seems to have a number of bets in play at one time, but he could be about to make his biggest play in years with a move into financial services. A few years ago, Branson missed out on buying assets from failed British bank Northern Rock (it was eventually nationalised) but his Virgin Money group remains a retail banking operation in the UK, and is said to be looking closely at the potential sale of bits of Northern Rock, Lloyds and Royal Bank of Scotland.
This veteran investor’s biggest recent punt has been in the general area of clean energy, with the pledge to establish a $US1 billion fund to invest in this area. Details are extremely sketchy though, and we haven’t actually seen a proper investment yet.
Soros’ investment funds are also concentrating on the small end of the resources sector, including stakes in Australian miners including Platinum Australia and Perth-based copper and gold miner Marengo Mining. It would appear Soros still thinks there is plenty of growth in the mining sector.
Wall Street trader John Paulson is said to have made about $US2.5 billion last year betting against the US mortgage market (a feat that is discussed in a new book with the understated title, The Greatest Trade Ever), has quickly become a sage of the Street. This year he has moved back into financial stocks such as Goldman Sachs and Bank of America. In mid-October, he spent almost $US280 million buying a 9.9% stake in Conseco, an insurance company that posted losses in 2007 and 2008.
Australia’s billionaires have stayed very focused on their core businesses, but the Pratt family’s share trading arm, Thorney Holdings, continues to look for little opportunities. In mid-October, Thorney purchased 15 million shares in labour provider Skilled Group, at a cost of about $30 million. Hardly a Buffett-sized bet, but an interesting little investment all the same.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
