Buffett’s Big Buy, Easing Oil Pressure Give Stocks Some Breathing Room

Forbes August 10, 2015 0

Energy prices got some relief, Twitter Twitter took off and the Oracle of Omaha took another shot with his elephant gun . Those were the stories that helped drive a big Monday rally on Wall Street that ceased a seven-day losing streak for the Dow Jones industrial average.

Energy prices got some relief, Twitter Twitter took off and the Oracle of Omaha took another shot with his elephant gun. Those were the stories that helped drive a big Monday rally on Wall Street that ceased a seven-day losing streak for the Dow Jones industrial average.

A solid day from Apple Apple was the driving force behind the Dow’s 1.4% gain, as the iPhone-maker took a break from a days-long slide, but the bigger news came from the aerospace sector, which featured the latest big deal of the current M&A boom.

Warren Buffett’s Berkshire Hathaway Berkshire Hathaway will buy aircraft components maker Precision Castparts Precision Castparts in a $37 billion transaction that adds another potential industrial platform to the conglomerate’s stable of businesses. While Buffett lauded Precision’s business and management in the deal announcement, it’s worth noting the sharp-eyed investor appears to be getting another great value. The $235 offer price is 21% more than Friday’s closing price, but a discount to where the stock traded at the start of 2015.

Warren Buffett added another elephant to his collection with Monday’s deal for Precision Castparts. (AP Photo/Nati Harnik)

Precision also makes parts for the energy industry, which partially explains its scuffling stock this year as oil prices remain battered. Monday offered a respite though as crude oil perked up and the energy sector of the S&P 500 rallied 3%. Energy names including Diamond Offshore Drilling, Ensco Ensco and Southwestern Energy Southwestern Energy posted gains near 8% to be among the index’s leaders.

The S&P 500 overall added 1.3%, closing at 2,104 to recoup all the ground it lost in August to date. Even with the bout of weakness during earnings season, the index is still up 2.2% on the year.

Apple’s gains certainly helped the Dow, S&P and the Nasdaq (up 1.2%) Monday as the stock tries to make its way back to its 200-day moving average, after breaking below the key technical level for the first time in nearly three years.

Another maligned tech stock getting a lift Monday was Twitter Twitter, which rallied after interim CEO Jack Dorsey disclosed that he added to his stake last week, as did CFO Anthony Noto and several board members. While the purchases by Dorsey were a minuscule fraction of his net worth, investors took the news as a vote of confidence in the business. The gains kept the stock above its $26 IPO price, which seemed in range last week as shares dropped to their lowest levels since the 2013 offering.

Follow @SchaeferStreet


Article originally posted in Forbes website.

Share:Facebook0Twitter0Google+0EmailPinterest0Reddit0StumbleUpon0LinkedIn0Digg

Comments