| To: Jacob Snyder who wrote (475) | 5/6/2002 12:37:12 AM |
| From: proctorad | of 11998 |
| |
Buffett likes H&R Block, Moody's
Billionaire predicts future U.S. terror attack with nukes
By CBS.MarketWatch.com
Last Update: 12:24 AM ET May 6, 2002
OMAHA, Neb. (CBS.MW) - Warren Buffett is giving hints on what's he's buying.
The taciturn billionaire said at a conference that two companies he likes are ratings agency Moody's and tax preparer H&R Block (HRB: news, chart, profile).
"They are both very good franchises," Reuters quoted Buffett as saying. "They require little or no capital and earn good returns on capital employed," he said.
Buffett, who bought minority stakes in those two companies over the past year, also said he liked the fact that Moody's and H&R Block have competitive advantages and face little threat to their businesses.
At his annual Berkshire Hathaway meeting, Buffett said his insurance holdings took a hit in the terrorist attacks last September, but he told investors that they're coming back strong.
But on the issue of security, Buffett predicted another terrorist attack against the United States in the future -- possibly with a nuclear device.
"We're going to have something in the way of a major nuclear event in this country," the Associated Press quoted Buffett as saying. "Whether it will happen in 10 years or 10 minutes, or 50 years ... it's virtually a certainty."
He said Washington and New York would be the likely targets because the terrorists would try to traumatize and kill as many people as possible.
Aside from more unexpected assaults, though, the world's second richest man said there's a threat from legal sieges against companies that can be linked to asbestos.
Buffett, chairman of Berkshire Hathaway (BRKA: news, chart, profile) (BRKB: news, chart, profile), addressed his annual meeting at the Omaha Civic Auditorium along with Vice Chairman Charles Munger. They stressed the strength of Berkshire's General Reinsurance and Geico despite catastrophic results following the Sept. 11 attacks -- losses that lopped $3.8 billion off Berkshire's worth and knocked Buffett's wealth down to $35 billion, according to this years Forbes list of wealthy people.
According to a Dow Jones account, Buffett likened asbestos liability to "a cancer on the American corporate world" and Munger forecast "more of a mess than we have now" in the next five years. Companies have faced increasing liabilities as legal assaults go after companies that can be linked to the carcinogen. See listing of potential asbestos legal targets.
Using the accumulated money from its insurance holdings, Berkshire takes stakes in companies that Buffett considers well-run. Dow Jones put that kitty this year at $1.8 billion.
Yet, according to Bloomberg News, Buffett is wary of the asbestos risks as he lines up future deals.
Buffett bought Johns Manville several years ago, a company that manufactured asbestos and filed for bankruptcy to limit its liability. That shield made it an acceptable risk, Buffett said, according to Bloomberg.
Regarding Enron-like accounting scandals, Buffett said he stays away from companies that talk about EBITDA (earnings before interest, taxes, depreciation and amortization), according to Dow Jones, suggesting that the number can be used to mask financial problems.
Thousands of Berkshire shareholders flocked to the meeting, which has been dubbed "Woodstock for Capitalists," to hear Buffett, known as "the Oracle of Omaha." Besides the meeting and receptions, the gathering descends on a minor-league baseball game and gets special deals at an Omaha jewelry shop and furniture store owned by Berkshire.
"In the shadow of Enron, people will find it refreshing to have a CEO who is honest and forthright," Robert P. Miles, a Berkshire stockholder and author of "The Warren Buffett CEO: Secrets from the Berkshire Hathaway Managers," told Associated Press.
Buffett turned Berkshire over 37 years from a textile company worth about $7 per share to the conglomerate empire that traded for $74,300 a share Friday for Class A stock. |
