Warren Buffett has had a long and impressive career as one of the greatest and most successful investors that have ever lived. Time and again, he’s impressed the world with his wise and calculated moves that have resulted in unbelievable gains for him and Berkshire Hathaway shareholders.
Let’s take a look back at one story that perfectly captures the Oracle of Omaha’s famed investing instincts.
The year was 2008, and if you know you’re history, then you’d know that it was the middle of a financial crisis that hit American markets and the rest of the world.
With even established corporations facing the possibility of bankruptcy, Buffett gave a lifeline to one industrial titan: General Electric (GE).
At the time, GE’s stock price took a plunge, and its CEO Jeff Immelt knew that the company would need a ‘rainy-day fund’ as a fallback as they weather through the economic downturn.
After seeing how Buffett poured $5 billion into Goldman Sachs, Immelt reportedly contacted the billionaire investor to see if they could strike a similar deal.
Striking a Deal
Buffett ended up investing $3 billion into GE through Berkshire Hathaway.
In exchange, he was granted preferred stock with a 10% annual dividend. The deal also allowed GE to buy back the shares after three years at a 10% premium.
Another stipulation is that Berkshire might be able to acquire 135 million of common shares in the corporation for a fixed price at any time within the coming five years. Buffett’s holding company set the price at $22.25 a share, which wasn’t too far off GE’s stock price at the time.
Of course, GE acknowledged how it wasn’t just money that Buffett gave the company. The deal also served as a vote of confidence for GE’s future from a respected figure in finance.
Incredible Pay Off
Buffett’s deal with GE certainly paid off. By the time the corporation bought back its preferred stock in 2011, Berkshire Hathway had already received a whopping $900 million in dividends.
Then there’s also the $3.3 billion GE paid for its stock and the $315 million Berkshire Hathaway made from selling the rest of its GE stock. Crunching the numbers, Buffett earned about $1.5 billion on the initial $3 billion he funneled into the corporation within just the span of three years.
Pretty impressive, huh? Well, that’s just the Oracle of Omaha at his best.