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November 07, 2008

Warren Buffett Likes Warrants
by Dudley Baker

The legendary Warren Buffet is doing a great favor for investors by bring the investment term warrants back into the limelight.

Within the last 2 months Buffett has stepped in and assisted with an infusion of capital in Goldman Sachs of $5 billion and General Electric of $3 billion. In both of these transactions Buffett insisted/demanded/requested/required, that he also receive warrants. These warrants essentially are an equity kicker, an additional incentive or sweetener to get the deals done.

The warrants Buffett received on Goldman Sachs and GE were for a period of 5 years, thus giving him the opportunity to purchase more shares at a specific price within this 5 year period of time. Warren Buffett with his wealth, financial status and bargaining skills was able to negotiate some great terms for himself.

So, briefly, let's define a warrant; a warrant is a security issued by a company giving the holder the right, but not the obligation, to purchase the underlying security at a specific price and expiring on a specific date in the future.

Warren Buffett's transactions were of course, private, and investors, like you and I, could not participate.

So the real title of this article should be, Warren Buffett Likes Warrants - Should You? And is there a way that investors can invest in warrants?

Yes. There are many companies which have warrants trading and specifically many of these companies are in the beaten down natural resource sector. As we all know, virtually all of the resource companies have been hit hard and so have the warrants trading on these companies, which is providing incredible opportunities for savvy investors.

As a rule we suggest that investor, select the warrants which are trading on companies which they like and which have a minimum remaining life of 2 or 3 years. We suggest those warrants which have very long lives and there are many in our database with 3, 4, 5 years and more. Time is needed to get through these current treacherous financial waters and time for the companies to execute on their business plans, thus making time our friend.

As my subscribers know, I have been selectively buying over the last couple of weeks and am comfortable with my purchases of shares and long-term warrants. I am building my inventory of shares and warrants to be sold at substantial higher prices in the coming months and years. Patience and good judgment will greatly reward investors.

To summarize, the only place to be in our opinion is in gold and silver (bullion, if you can find some), mining shares (yes, they will come back) and long term warrants on selected mining shares.

For subscribers, we also provide a database for all companies with call options and leaps trading on the natural resource shares in addition to the warrants. A valuable tool for all investors.

For those readers interested in warrants and why Warren Buffett is receiving warrants in his recent transactions, visit our website and learning center for more information.

Dudley Pierce Baker
Guadalajara/Ajijic, Mexico
PreciousMetalsWarrants
InsidersInsights

Dudley Pierce Baker is the owner and editor of Precious Metals Warrants and Insiders Insights. Articles are written by Dudley Baker along with contributing editors, Arnold Bock of Mendoza, Argentina and Lorimer Wilson of Toronto, Canada. PreciousMetalsWarrants provides an online subscription database for all warrants trading on junior mining and natural resource companies in the United States and Canada and a free weekly newsletter. InsidersInsights alerts subscribers when corporate insiders of a limited number of junior mining and natural resource companies are buying and selling.

Disclaimer/Disclosure Statement: Neither PreciousMetalsWarrants.com or InsidersInsights.com is not an investment advisor and any reference to specific securities does not constitute a recommendation thereof. The opinions expressed herein are the express personal opinions of Dudley Baker. Neither the information, nor the opinions expressed should be construed as a solicitation to buy any securities mentioned in this Service. Examples given are only intended to make investors aware of the potential rewards of investing in Warrants. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions involving stocks or Warrants.

Copyright © 2005-2009 Dudley Baker

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