In addition, here’s what Buffett himself wrote on the topic earlier this month:
To date, we’ve never had a five-year period of underperformance, having managed 43 times to surpass the S&P over such a stretch. (…) But the S&P has now had gains in each of the last four years, outpacing us over that period. If the market continues to advance in 2013, our streak of five-year wins will end.
As Buffett says, “Price is what you pay. Value is what you get.”
Buffett will bag another elephant
Sure, Buffett may have used $12 billion in Berkshire’s cash last month in a joint deal with 3G Capital to acquire H.J. Heinz Company (NYSE:HNZ), but he’s already publicly stated his trigger finger is just itching to make another big buy. Sure enough, despite the Heinz acquisition, in his most recent shareholder letter, Buffett also lamented his “inability to make a major acquisition” in 2012.
So, who might Buffett have his eye on now? As I suggested last month, and keeping in mind Buffett’s longstanding fondness for the agriculture industry, I wouldn’t be surprised if he tried to purchase a company like heavy equipment king Deere & Company (NYSE:DE), whose shares currently trade for less than 11 times trailing earnings and under 10 times forward estimates. Deere & Company (NYSE:DE)’s current market capitalization is a whopping $34 billion, but that should still be well within Buffett’s reach when we consider his ever-growing cash pile and demonstrated willingness to selectively issue Berkshire shares given a truly compelling opportunity.
If Buffett wants to fire his gun more than once, however, it might make sense for him to pick up a couple of smaller holding companies like Leucadia National Corp. (NYSE:LUK) and Markel Corporation (NYSE:MKL), whose respective market caps are much more manageable at $6.5 and $4.9 billion. After all, Berkshire is already working with Leucadia in a 50/50 commercial lending joint venture (aptly named Berkadia).
Markel — which isn’t called “baby-Berkshire” for nothing — would fit in nicely given its specialty insurance operations and a knack for making smart long-term acquisitions. What’s more, in buying Markel, Buffett would also gain renowned value investor and CIO Tom Gayner, who has also been compared to Buffett himself a time or two.
The article 3 Bold Buffett Predictions for the Rest of 2013 originally appeared on Fool.com.
Fool contributor Steve Symington owns shares of Markel. The Motley Fool recommends Berkshire Hathaway, H.J. Heinz Company, and Markel. The Motley Fool owns shares of Berkshire Hathaway and Markel.
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