Berkshire Ramps up Bets on Credit Cards With Synchrony Stake

by Brian Riley 0

 Warren Buffet, the “Wizard of Omaha” is an American legend. He boils his strategies into simple teachable phrases; My favorites are “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1”; “Risk comes from not knowing what you’re doing”; and “If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.”

When he buys into companies, the industry watches. It is not like you or me buying a few shares. He buys huge positions in companies, and in this regulatory filing, you can see his acquisition of more than 17 million shares in Synchrony.

• Synchrony shares, down more than 18 per cent so far this year, jumped 4.5 per cent in after market trading.

• The Oracle of Omaha’s financial moves are closely followed by Wall Street. The foray into Synchrony could provide a much needed fillip to the credit card industry, which has been reporting rising write-downs as some Americans struggle to pay off their debts.

Warren holds a largest stake (17%) in American Express; as I recall, this position has been held for about 20 years. Amex is still very strong. Their CEO, Ken Chenault, is a legend himself, who built American Express into the global powerhouse that it is today.

It is interesting to note that as Buffet bought his position in Synchrony, he completed his exit from GE, the parent that IPO’d Synchrony!

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

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