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When Warren Buffett
announced he wanted to use between $40 and $60 billion to buy a company several days ago, picking a target for the billionairest of all billionaires became the favorite pastime of financial writers everywhere -- and our bloggers were as eager as anyone else to come up with just the thing for the guy who already has everything (and everything, in this case, includes bunches of shares of companies as diverse as dull
sheetrock manufacturer USG Corp. (NYSE:
USG) to hip
shoe company Nike Inc. (NYSE:
NKE)).
Of course, Buffett's needs are unique. First of all, the company has to be both
big and a
good value -- no 80x P/E multiples for Warren. It has to be a
relatively simple business (I'm thinking nanotech is out), have a
good management team and
no dark and dirty secrets (so sub-prime lenders are probably off the list). Finally, the company should have
solid, long-term competitive advantages.
Sheldon Liber suggests a couple that might make the grade:
Allstate Corp. (NYSE:
ALL), the insurance company, which at about $38 billion in market capitalization and a 7.8x P/E ratio fits both the "big" and "cheap" qualifiers. Plus, we all know that Warren Buffett loves insurance companies, and given its retail approach, it's not much of a competitor with longterm portfolio company GEICO.
Emerson Electric (NYSE:
EMR) also seems a good candidate with its $37 billion market cap and 19x P/E ratio -- but is it simple enough? Its business is, according to Hoover's, making "a host of electrical, electromechanical, and electronic products, many of which are used to control gases, liquids, and electricity." Hmmm.
When
Gary Sattler suggests Warren might buy
General Electric Co. (NYSE:
GE)'s plastics division, it's a good concept (simple, well-managed) but the price is way too low at around $10-12 billion. A commenter, however, brings up a good replacement in
Lowe's Companies Inc. (NYSE:
LOW); it has a $47 billion market cap and a reasonable P/E ratio of 15.5x. What's more, it has none of the bad-management baggage of competitor
Home Depot Inc. (NYSE:
HD). Does it have a "moat," though? I suppose that's a question for Warren. He does own some of each company, meaning that he's already emotionally invested in the sector (a plus) although it's obvious from our near-tie in the
Battle of the Brands that neither holds a substantial consumer-facing edge competitively.