Buffett, Malone: Not-so odd investment pair

Wed Feb 15, 2012 8:18pm EST
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By Ben Berkowitz

BOSTON (Reuters) - Investing can make for strange bedfellows.

On Tuesday Warren Buffett's Berkshire Hathaway reported taking a 1.48 percent stake in John Malone's Liberty Media in the fourth quarter, nearly enough to make Berkshire a top-10 shareholder. Berkshire also ramped up its stake to nearly 3 percent in satellite broadcaster DirecTV, which Malone formerly chaired and in which he remains a major holder.

Aside from their riches, savvy investing and simple lifestyles, the two investors could not be more opposite: Buffett built a diversified financial and industrial empire and has famously called the low income-tax rate he pays unfair. Malone built a media powerhouse through deals structured to incur the least tax.

Though the pairing may look odd, investors say the two are in many ways kindred.

Malone "is a guy who's super savvy," said Bill Smead of Smead Asset Management, which has about 3 percent of its equity assets in Berkshire shares.

"In the cable/new media world of the last 30 years, he's been the Warren Buffett."

Liberty also has one of Buffett's very favorite virtues - it is cheap, trading at 5.5 times cash flow, against a multiple of 7 or 8 times for peers.

"There's a sizeable discount to the company's net asset value and I think they're going to reduce that," said Collins Stewart analyst Thomas Eagan.   Continued...