Not some reinsurance exotica. Old-fashioned "Buy good companies at good prices".
Two years ago billionaire investor Warren Buffett’s company Berkshire Hathaway (BRK.A) snapped up 8.7 million shares of Nalco Holding (NLC), a move that some speculated, at the time, was a bet on water filtration. Berkshire Hathaway’s 6 percent ownership of Nalco (9 million shares as of Dec. 31, 2009) turns out to be a play in the business of oil spills as well.
Nalco is one the world’s largest water-treatment companies and a big part of its business is to help energy, paper and other major industries improve water use. The company also happens to own a proprietary chemical that breaks down oil in water. And this chemical is being used by BP to combat the 210,000-gallon-a-day oil spill in the Gulf of Mexico. About 372,000 gallons of dispersants have been used and about 180,000 gallons of supply remain, according to the latest update from government’s joint information center.
The run on Nalco’s dispersant has yet to make a substantial impact to its bottom line, CEO Erik Fyrwald said last week in a statement. For one, chemical dispersant are just a small part of its overall business. In short, Nalco will have to sell a lot more dispersant before it generate substantial profits. Of course, that could very well happen if BP doesn’t stop the deepwater oil leak soon.
Buffett may be called the oracle, but it’s not like the guy peered into his crystal ball one day and saw the BP oil spill. Instead, he saw an increasing need for water-intensive industries like mining and oil and gas to find ways to manage its water use more effectively....MORE