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Two Ways To Play: The Buffett Way


Strengthen your portfolio in good times and bad.

The Buffett Way

According to Bloomberg, Berkshire Hathaway's (BRK.A) Warren Buffett may be ready to put over $40 billion of the company's cash to work at a time where other bidders are struggling to find cash. With recession concerns weighing on the markets, investors expect Buffett to scoop up bargains. Analysts say the disruptions work in his favor and that the current environment is perfect for his taste. Berkshire reports today and will likely say 1Q earnings fell due in part to lower profits from the insurance sector. For another perspective, read Professor Satyajit Das' Market Bullish on Equities?

From the Bull Pen: Bulls can take a page from the Buffett playbook and look to companies with sustainable competitive advantages such as General Mills (GIS); sell-stops below $60.

From the Bear Cave: Bears can short stocks like General Motors (GM). One option is to fade the stock into resistance at $25.

MicroHoo Likelihood Fading

According to the Wall Street Journal, time may be running out for Microsoft's (MSFT) CEO Steve Ballmer. With an announcement likely to come today, the company may be leaning toward making a hostile bid on Yahoo (YHOO). In January, MSFT made an unsolicited cash and stock offer to acquire YHOO, but shareholders have balked at the $44.6 billion bid. According to insiders, MSFT may raise its bid to the range of $35-37 per share. Still, analysts are skeptical as Yahoo has been strengthening ties with Google (GOOG) with the idea of maintaining independence at all costs. For more, read Macke's Movers by Professor Jeff Macke.

From the Bull Pen: Bulls are cautious playing the merger game but can play the upside in Yahoo. The use of protective puts can be an option.

From the Bear Cave
: Technical analysis does not hold in these binary events, but bears can consider the downside for a quick profit should MSFT raise its bid.

For more ideas, check out Minyanville's Spotlight Stocks.

Quick Check Around the World

Asian trading closed with the Hang Seng +1.89%, Nikkei +2.05%, Sensex +1.81% and Taiwan +0.49%.

A quick check of European bourses finds the CAC +1.82%, DAX +1.55%, FTSE +1.46%

As of 8:40 AM EST S&P futures are higher by +14.3 points to 1426, and Nasdaq futures are up by +21.5 points to 2004.

A Look At Commodities

In commodities, crude is higher +0.60 to 113.12. Gold is up +4.10 to 855.00. Silver is higher +0.074 to 16.195, and copper is up +2.7 to 375.25.

The dollar index is lower -0.022 to 73.253.

On the Radar

Change in Nonfarm Payrolls: -20 k vs. -75 k cons.
Unemployment rate: 5.0% vs. 5.2% cons.
Change in Mfg payrolls: -46 k vs. -35 k cons.
Avg. Hourly earnings (m/m): 0.1% vs. 0.3% cons.
Avg. Hourly earnings (y/y): 3.4% vs. 3.6% cons.
Avg. Weekly Hours: 33.7 vs. 33.7 cons.

10:00 Factory Orders: 0.2% cons.

Happy Friday! Good luck!
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No positions in stocks mentioned.

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