Do you think Warren Buffett was a Lone Ranger fan? I bet he was, because he
sure seems to like riding that white horse to the rescue. Berkshire Hathaway's
(NYSE: BRK.A ) announced $5 billion investment in Bank of America puts him back
in the role of hero. It is said he only recently thought of making the
investment while sitting in his tub this week. He probably secretly donned the
mask, waved his loofah and yelled, "Hi ho Silver, away!" For the second time
since the financial collapse of 2008, Buffett is bringing his substantial war
chest of capital to the financial services industry under the auspices of
providing confidence and support to the economy and the United States of
America. Make no mistake: He is doing this deal to make big money. Buffett knows
a bargain when he sees one, and given that he is one of few capable of making an
investment of any meaningful size, he gets to dictate terms. In this go-around
he gets a 6% coupon plus warrants to buy common shares of Bank of America at
very depressed levels. Given how he fared on his deal with Goldman Sachs, I'm
sure he will do similarly well here. More importantly, the deal fuels his ego
for being the investment god and savior that he is. My only question: Why
doesn't he do more of this bottom feeding? Given the selling in the market,
there certainly are plenty of candidates for him to come riding in to save the
day. Stocks are lower across the board. Perhaps he is already actively buying
below the radar screen and we have yet to hear about it. One thing I do know is
there are many beaten-down stocks he wouldn't touch no matter the price.
Buffett's dossier is well known. There is no way he changes his stripes now.
If you are holding one of these five beaten-down stocks waiting for Buffett or
some other angel to come to the rescue, don't hold your breath.
Hewlett-Packard Like Bank of America, Hewlett-Packard (NYSE: HPQ ) shares have
sold off hard during the recent market correction. The technology company has
seen its stock sink 32% since July 22. Fueling that decline were dramatic moves
by management amid a gloomy forecast for the future. One thing Buffett does not
buy is technology. He claims to not understand these stocks like he does
insurance, banks and other basic industrial concerns, and he readily admits to
missing out on several opportunities to buy low over the years. Hewlett-Packard
might or might not be attractive at these prices, but there is no Warren Buffett
waiting in the wings to show support for this wounded technology company.
Research In Motion Despite Buffett's reticence to own technology companies, he
does buy things that he uses or places where he shops. He loved See's Candy,
so he bought the company. He did the same thing with Dairy Queen. But because
Buffett does not own a cell phone, it is unlikely he will come to the rescue of
falling personal phone and data device maker Research In Motion (NASDAQ: RIMM ).
RIM has seen its fortunes change dramatically. Apple has effectively destroyed
the company. Since earlier this year, the company has seen its stock value
plummet by 60%. At currently depressed levels, the only buying here is on
speculation that someone will come to the rescue. It won't be Buffett.
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