Wednesday, November 14, 2007

Warren Buffett Buying Financials

Berkshire Hathaway's (BRK.A) Warren Buffett is buying banks.

Buffett bought Bank of America (BAC) during the 3-months ended 6/30. His purchase prices were between $ 48.34 and $ 50.14, with an estimated average price of $49.6 for his 8.7 million shares. Now, the BAC position is small for Berkshire as it represents 0.7 % of Berkshire's holdings as of 6/30. His holdings was 8700000 shares as of 2007-06-30.

Buffett has long been a fan of financials holding shares in Wells Fargo (WFC), M&T Bank (MTB) and HSBC Holdings (HBC). According to the site Gurufocus, Buffett has almost 40% of Berkshire's holding in financials.

Buffett's buying is indeed a sign not of a short term bottom in the sector, but of the long term health of it. While Buffett's typical holding period for a common stock has nearly evaporated for his "forever" mantra of earlier years, he still has a multi year time frame which on Wall St. is an eternity.

It also indicates "value" now exists in financials, a sentiment I post on yesterday. Do not confuse "cheap" with "value". A cheap stock is one that will not cost you much money to purchase. A value stocks costs what it costs to buy but it is worth much more, a significant difference.

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