Investing legend Warren Buffett has an unprecedentedly large mountain of cash ($128 billion) sitting on Berkshire Hathaway’s balance sheet. The 89-year-old billionaire has said he plans to use some of that money to fund an “elephant-sized” acquisition, which he hasn’t found yet.
Those familiar with his investing style and thought process believe that the first place Buffett will look into next year is most likely the transportation sector.
“I believe Warren Buffett will acquire Federal Express [in 2020],” Doug Kass, president of hedge fund firm Seabreeze Partners Capital Management and a longtime Buffett watcher, said on Yahoo Finance’s The First Trade on Tuesday.
FedEx would be a good addition to Buffett’s industrial-heavy portfolio, given his consistent love for transportation stocks. Berkshire Hathaway already owns a minority stake in FedEx’s primary rival, UPS, and fully controls several other logistics companies, including BNSF Railway Company, Charter Brokerage, McLane Company and XTRA Lease.
The possibility of acquiring FedEx has been floated by other hedge funders in the past. Trip Miller of Gullane Capital Partners, for one, suggested the deal on CNN Business in April ahead of Berkshire Hathaway’s 2019 shareholders meeting. “This is the kind of thing Buffett looks for,” he said.
Whether Buffett will eventually pull the trigger on FedEx (or another company) or not, it probably won’t affect Berkshire Hathaway shareholders too much.
“I see Berkshire Hathaway as an S&P 500-style stock. It’s so diversified now in terms of its industrial and financial components,” Kass said on The First Trade. “It’s very hard for the Oracle of Omaha to move the needle with any acquisition.”
The potential FedEx buyout was one of Kass’ three merger and acquisition predictions for 2020. The other two are Amazon acquiring Kohl’s and Google acquiring Twitter and Square.