|
Buffett buys junk bonds
|
 |
December 29, 2000: 7:54 a.m. ET
Billionaire investor gambles on beat-up bonds, newspaper says
|
NEW YORK (CNNfn) - Billionaire Warren Buffett, best known for investing conservatively in undervalued stocks, has fixed his sights on junk bonds, the Wall Street Journal reported Friday.
Buffett's Berkshire Hathaway Inc. recently paid several hundred million dollars for the junk bonds of commercial lender Finova Group Inc. (FNV: Research, Estimates), and has also bought bonds issued by insurance company Conseco Inc. (CNC: Research, Estimates), the newspaper said.
This year's steep drop in the value of junk bonds has gotten the attention of investors looking for bargains, though many of them already have large stakes in the bond markets. Buffett's move shows that junk bonds are starting to draw "value" investors who usually shun securities such as high-yield, high-risk bonds and park funds in stocks of big companies and other, generally safer, investments, the Journal said.
Buffett reportedly keeps several billion dollars of cash on hand, which gives him the ability to come in quickly on particular opportunities. Hathaway agreed to buy building-products maker Johns Manville Corp. for about $1.9 billion earlier this month, for instance, the paper said.
Buffett has actively invested in financial institutions, so it is little surprise that Finova became a potential investment. When Finova bonds fell in October to the low 60s from more than 70 cents on the dollar, Buffett spent several hundred million dollars on the bonds, the report said.
 A spokesman for Berkshire Hathaway declined to comment, according to the Journal.
Omaha, Neb.-based Berkshire Hathaway is primarily an insurance company with ownership of a range of businesses ranging from Dairy Queen to Justin Industries, a bricks and boots manufacturer.
While Buffett's move into junk bonds is rare, it is not unprecedented, the report said, noting he bought $139 million of Washington Public Power Supply System bonds, known as "Whoops," in 1983, earning a handsome return.
Buffett and his company came back this year after a rough patch. Berkshire's Class A shares (BRK.A: Research, Estimates) closed at $69,700 Thursday, up 69 percent from March 10, the paper noted. 
|
|
|
|
|
 |
|
