The Top 5 Contrarian Reads of the Week: Berkshire Hathaway Inc. (BRK.B), H.J. Heinz Company (HNZ)

When Mr Buffett made investments such as in Coca-Cola in the 1980s, he was happy to make unprotected bets on growth. Berkshire never bit on Heinz until now, when a deal arrived with terms that guarantee it a 6 per cent return. In a world of near-zero interest rates, that 6 per cent looks pretty attractive. Mr Buffett, evidently, does not expect rates to rise sharply any time soon. A decade ago, he demanded a first-day return of 13 per cent before he would bother to consider a deal. Now the Oracle takes 6 per cent for his money. We should pay attention. There could hardly be a stronger signal that the investing tide has changed.

Similarly, the Financial Times’ John Authers is unconvinced [free registration required] that this deal signals a vote of confidence from Buffett on a near-term rebound in the economy:

We already know from that deal [Berkshire’s 2009 acquisition of railroad operator Burlington Northern Santa Fe] that Mr Buffett is bullish about the US economy. But Heinz is almost the opposite. Come recession or boom, people will eat ketchup and baked beans. Obesity seems unaffected by the economy, so the Weight Watchers brand also appears to be an economically durable business. Its “beta” to the market, at 0.58, is very low. This company appeals because of its imperviousness to external conditions, not as a play on the economy.

Enjoy your weekend, contrarian Fools!

The article The Top 5 Contrarian Reads of the Week originally appeared on Fool.com and is written by Alex Dumortier, CFA.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on LinkedIn. The Motley Fool recommends Berkshire Hathaway and H. J. Heinz Company. The Motley Fool owns shares of Berkshire Hathaway.

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