DEALTALK-Some elephant hunting tips for Warren Buffett

Sun May 25, 2014 8:00am EDT
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By Luciana Lopez

NEW YORK May 25 (Reuters) - Far be it from us to offer tips to Warren Buffett, the most celebrated stock picker of his age, but here goes:

The Oracle of Omaha has suggested he will hunt for his next "elephant" - his favorite word for big acquisitions -- among energy companies. That could dovetail with the bet he made in 2009 when he bought Burlington Northern Santa Fe railroad, which has turned into an indirect play on the U.S. oil production renaissance: BNSF moves about a third of oil-by-rail, a surging segment of freight rail.

So, we have some ideas. Reuters screened for U.S. and Canadian companies with relatively low debt and market capitalizations above $5 billion, among other criteria.

First, because Buffett's Berkshire Hathaway has about $49 billion to spend, he's said he's looking at capital intensive companies, which offer plenty of chances to put that money to work.

He might like a hot niche like oilfield services or pipelines: good candidates could be Baker Hughes in drilling services or Williams Partners in oil and gas distribution, which would also expand the scope of his recently rebranded Berkshire Hathaway Energy unit.

Alternatively, he could opt for a safer play by scooping up another regulated utility to add to previous purchases such as NV Energy in Nevada and MidAmerican Energy, which serves customers in eleven states and added about $1.47 billion to Berkshire's profits in 2013. While not spectacular earners, regulated utilities tend to be steady, reliable cash generators, a feature Buffett likes. One candidate could be Pinnacle West Capital, though it may be a little smaller than what he's looking for.

None of Baker Hughes, Williams Partners and Pinnacle West responded to requests for comment.   Continued...