Warren Buffett

Warren E. Buffett

On May 24, 2005, Berkshire Hathaway, acquired a company called PacifiCorp, from the parent company Scottish power. Berkshire Hathaway, bought PacifiCorp for $5.1 billion dollars’ cash, along with $4.3 billion dollars in liabilities and preferred stock. At the end of that day the stock prices for Berkshire Hathaway closed with a 2.4% gain, which is $2.55 billion dollar gain in market value. Scottish Power had a similar trend at the end of the day, their share price went up by 6.28%.

It is not unusual for a company to acquire another, and in doing so it is also not unusual for the stock prices to rise in the days following the purchase. Both companies were in decent positions at the time of the sale, so it was most likely thought that the risk was lower, making the companies look profitable. When it comes to investing in a company, you have more interest in the companies that will make you a profit, and you tend to follow companies with upward trends.

At this time, there was a new interest in Berkshires Hathaway’s chief executive officer, Warren Buffett. The that time he was the second richest man in the United States, with a net worth of about $44 billion dollars. The general public had a great deal of respect for Warren Buffett, and valued some of his opinions. So if his company expanded, it was thought to be a good investment. The initial gain of $2.55 billion dollars implies that the intrinsic value of PacifiCorp was rather high, and was a good investment for Berkshire Hathaway.

Warren Buffett had said that the energy sector had interested those at Berkshire Hathaway for some time. Some factors that may have went into place when looking to invest in PacifiCorp could include a range of values. A few of the major values include revenue, earnings before interest and tax, earnings before interest, tax, depreciation, and amortization, net income, earnings per share, and book value.

The mean for revenue is $6.584 billion dollar and the...