Buffett Missing in Action as GE’s Turnaround Plan Gets Upvote




General Electric (GE) is up 9.1% today as of 11:50 AM ET. GE has announced that that it has entered a definitive agreement to sell its Biopharma business to Danaher (DHR). The deal’s valued at $21.4 billion and should help GE lower its debt.

2019 is turning out to be a good year for GE as its turnaround plan seems to have gotten an upvote from markets. Even before today’s spike, GE had gained 34.3% this year, based on its closing prices on February 22. The SPDR S&P 500 ETF (SPY) has risen 11.7%.

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Berkshire Hathaway

General Electric was once part of Berkshire Hathaway’s (BRK-B) portfolio. Last year, there were rumors that Berkshire chairman Warren Buffett might again consider buying GE. While Buffett denied the claims, he said in January 2018 that he might consider General Electric at the “right number.” However, Buffett somewhat changed his opinion later in the year and said he’s not looking at buying GE.

To be sure, Buffett has exited several stocks like Oracle (ORCL), IBM (IBM), and Walmart (WMT) over the last two years. Leaving aside 2019 price action, GE has been a sinking ship for investors over the last two years.

Cash pile

Meanwhile, Berkshire Hathaway holds more than $100 billion in cash, and the company couldn’t find many investment opportunities in the fourth quarter, as you can see in its subdued net buys.

In his annual letter, Buffett said that he’s been looking at a big acquisition but lamented the lack of such opportunities at a reasonable price. See Warren Buffett and the Problem with Elephants for more information.


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