Market Overview

ETFs For Warren Buffett's Next Takeover (KOL, EWJ, XLF)


It's one of Wall Street's favorite past times, asking "Who is next?" with regards to mergers and acquisitions activity and when it comes to Warren Buffett and Berkshire Hathaway (NYSE: BRK-A, BRK-B), the question gets asked a lot.

Put the phrase "warren buffet takeover targets" into Google and you'll get 170,000 results in less than three tenths of a second. That's how often this topic has been opined on. There are plenty of lists of potential Berkshire targets floating around out there. The Wall Street Journal published a credible one last year that included companies such as Automatic Data Processing (NYSE: ADP), Illinois Tool Works (NYSE: ITW) and W.W. Grainger (NYSE: GWW), all of which seem to fit well with Berkshire's existing portfolio of businesses.

Another far less credible list included CSX (NYSE: CSX), Norfolk Southern (NYSE: NSX) and Union Pacific (NYSE: UNP). Apparently Berkshire's ownership of Burlington Northern isn't enough on the railroad front in the eyes of the publisher of that list, though Uncle Sam might have something to say about Buffett owning two of the largest U.S. railroad operators.

Today, Twitter is aflutter with speculation that Buffett might be interested in buying a coal company, perhaps the largest U.S. coal producer Peabody Energy (NYSE: BTU) though there are other reasons coal stocks are on the move today.

With that, let's look at some ETFs that have multiple potential Buffett targets.

Market Vectors Coal ETF (NYSE: KOL) Admittedly, the Market Vectors Coal ETF does have a couple of targets that may be of interest to Buffett, but we'll go out on a limb and say it won't be Peabody. Peabody, assuming it even wants to sell itself, a notion that has not been confirmed, could probably land a higher price out of a foreign rival. Berkshire could definitely get Alpha Natural Resources (NYSE: ANR) at a lower price, though we think Joy Global (NYSE: JOY) might be the real target among KOL's constituents.

Industrial Select Sector SPDR (NYSE: XLI) The Industrial Select Sector SPDR is home to W.W. Grainger and Joy Global among other companies that could be seen as appealing to Buffett. A recent Bloomberg piece named Stanley Black & Decker (NYSE: SWK) and Parker Hannifin (NYSE: PH) as two more potential targets for the Oracle of Omaha. Both are XLI constituents.

Financial Select Sector SPDR (NYSE: KBE) Given how many bank stocks Berkshire has equity stakes in, putting the Financial Select Sector SPDR on this list isn't a bold proclamation. However, there were rumors several years ago Buffett could pull the trigger and acquire American Express (NYSE: AXP) outright. The Dow component is XLF's eighth-largest holding. Going further down XLF's lineup and into more recent speculation, there has been talk of Berkshire acquiring Bank of New York Mellon (NYSE: BK).

SPDR S&P Insurance ETF (NYSE: KIE) With Berkshire owning plenty of insurance companies, the SPDR S&P Insurance ETF is an ideal place to find multiple candidates for the conglomerate to fold into its insurance family. Berkshire's insurance business isn't growing at a rapid clip these days meaning growth via acquisition could be in the cards.

iShares MSCI Japan Index Fund (NYSE: EWJ) Since 2008, Buffett has visited South Korea, China, India, Italy, Germany, Spain and Switzerland, among other nations, looking for investment opportunities. Add Japan to the list. Buffett was there in November 2011 and this developed market with scores of recognizable brands trading at some would say cheap valuations, might be chock full of candidates for Buffett to make an international splash with.


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