NRG Energy: a better way to play Buffett?

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When I say “play Buffett” I meant people who follows Buffett investing strategy, more specifically people who buy and hold his company Berkshire Hathaway (NYSE: BRK.A, BRK.B) stock. This is not easy as Buffett’s strategy is not clear cut, and his company stock is mostly overpriced in recent years (because of his fame), not to mention doing homework on Berkshire is almost mission impossible (at least I felt I cannot understand his corner stone business: insurance). So here is a better way:

Buying the stocks Buffett bought

Berkshire is a net buyer of equities (stocks), and because of its size, it has to file buy/sell activities to SEC each quarter (gurusfocus has a nice table for this). Buying the stocks Buffett bought @50% or 30% off Buffett price, will offer the margin of safety (both in terms of company business and the stock price) in investing. As I said in my previous NRG post, Buffett average cost of NRG stock is about $34.36 per share.

A showdown between Exelon and NRG Energy
I received the annual meeting and Exelon proxy material: both companies sent the letter and voting card twice (one before the new offer, one after). I voted with the NRG board before Exelon raised its offer 🙂

July 2, Exelon increased exchange offer from 0.485 to 0.545 Exelon share for one NRG share (Exelon IR web site).

July 6, NRG rejected Exelon new offer (NRG IR
web site)

Fortune magazine article. Latest Economist also had an article on this topic. I think NRG Energy assets in Texas is more valuable than Exelon midwest (Chicago) because of demography (population, and economy in Texas will grow faster in the future).

What’s the right price?
It appears David Cane, the CEO of NRG, is expecting something in the 30s. Currently Exelon offer is about $26 to 27 (0.545 share of EXC stock). I believe when Buffett bought this, he was not expecting to take a loss. So my advice to John Rowe (CEO of Exelon): at least raise the offer to make the Orcale of Omaha break even, OK?

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