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1. Buffett's Berkshire Buys Target Stock
2. Manufacturing Growth Slows in October
3. Construction Spending Falls for Six Months in a Row
4. Applications to Buy and Refinance Homes Tumble
1. Buffett's Berkshire Buys Target Stock
Berkshire Hathaway, billionaire investor Warren Buffett's company, disclosed in
filings with the Securities and Exchange Commission that it has bought $268.8
million worth of stock in discount retailer Target.
Berkshire bought 5.5 million shares of Target as of June 30, according to its
quarterly SEC filing. That's a 0.6 percent stake in the company, based on shares
outstanding, says Reuters. Berkshire already owns 19.94 million shares of
Wal-Mart, Target's main rival.
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Berkshire also significantly increased its stake in Johnson & Johnson. The
company multiplied twelve-fold its shares in J&J from 1.97 million as of March
31 to 24.59 million as of June 30. The company values its 0.8 percent stake in
J&J at $1.47 billion.
Berkshire filed requests with the SEC on Aug. 14 to withhold disclosure of the
two investments. The Target request was approved whereas the J&J request was
denied. However, Berkshire decided to report both transactions, saying that the
confidential treatment was no longer needed for the Target purchase. Berkshire
makes such requests so that other investors don't rush in to buy the stocks.
Buffett's investment strategy is to buy name-brand companies that have fallen
out of favor with Wall Street. He buys companies that he views as undervalued
and holds on for a long time while the companies come back in to favor. Some of
the companies that Berkshire has a large stake in are American Express, H&R
Block, Anheuser Busch, GEICO and many others.
The strategy has paid off. Berkshire Hathaway's stock topped $100,000 per share
last week, the first time that's ever happened in the history of the New York
Stock Exchange. It's currently trading around $105,000 a share.
Shares of Target traded as high as $60.34 after Berkshire released the news, but
have fallen back down to around $58.31 a share. Johnson & Johnson shares were
little changed.
Editor's Note:
2. Manufacturing Growth Slows in October
The nation's manufacturing sector expanded at its slowest clip in more than
three years in October, a trade group said Wednesday.
The Institute for Supply Management, based in Tempe, Ariz., said its
manufacturing index registered 51.2 in October, below September's reading of
52.9.
It was the index's lowest level since June 2003 and reflected persistently high
raw material prices and a decline in new orders, according to data provided by
purchasing and supply executives.
Analysts had been expecting a reading of 53.
A reading of 50 or more indicates expansion, while below 50 shows contraction.
The October figure represented the 41st consecutive month of growth.
The ISM's employment index grew to 50.8 in October from 49.4 in September. The
prices paid index fell to 47 in October from 61.0 in September. The new orders
index fell to 52.1 in October from 54.2 in September, while the customers'
inventories rose to 52 from 49 in September.
The eight industries that reported growth in October were: apparel, leather and
allied products; miscellaneous manufacturing; computer and electronic products;
food, beverage and tobacco products; nonmetallic mineral products; furniture and
related products; chemical products; and paper products.
Global Insight industrial economist Tom Runiewicz said the manufacturing sector
is likely to experience much slower growth in 2007, perhaps 2.5 percent on an
annualized basis, compared with an estimated 5.2 percent in 2006.
Runiewicz' prediction assumes a slowdown in housing, a decline in consumer
spending for big-ticket items such as cars and appliances because of stubbornly
high energy prices and less corporate investment in everything from heavy
machinery to personal computers.
Stock prices fell in early trading Wednesday on Wall Street. The Dow Jones
industrials declined 5.6 to 12,076.33, while the Nasdaq composite index slipped
2.74 to 2,363.97. The broader Standard & Poor's 500 index fell 0.36 to 1,377.58.
© 2006 Associated Press.
Editor's Note:
3. Construction Spending Falls for Six Months in a Row
Construction spending fell in September as home building declined for a sixth
consecutive month, the longest stretch of weakness in residential construction
in more than a decade.
The Commerce Department said that spending on construction projects dropped by
0.3 percent to a seasonally adjusted annual rate of $1.196 trillion in
September. It was the biggest decline since a 0.7 percent fall in July and the
fifth month in which overall construction activity has either declined or been
flat.
Housing was down 1.1 percent in September, reflecting the steep slump in this
once booming sector as builders have slashed construction plans in the face of
slumping sales demand.
In a second report, the Institute of Supply Management said its closely watched
gauge of manufacturing activity edged down to 51.2 in October, compared to a
September reading of 52.9. The October performance was below the 53.0 that
analysts had been expecting.
The government reported last week that the overall economy slowed to a
lackluster growth rate of just 1.6 percent in July-September quarter, the
slowest pace in more than three years, as housing construction plunged at a rate
of 17.4 percent, the steepest drop in four quarters of declines.
Some economists have worried that the sharp drop in housing could rattle
consumer confidence and push the country into a recession. However, those fears
have lessened somewhat in recent weeks as gasoline prices, which had surged
above $3 per gallon, have retreated, leaving consumers with more money to spend
on other items.
For September, the 1.1 percent drop in private residential construction was the
sixth consecutive decline of 1 percent or more. It pushed total spending in this
area down to $312.7 billion at a seasonally adjusted annual rate.
The weakness in housing was partially offset by a small 0.1 percent rise in
spending on nonresidential private building projects, which rose to an all-time
high of $312.7 billion at a seasonally adjusted annual rate.
This gain, which was the smallest percentage increase since February 2006,
reflected increases in hotels, office buildings and the category that includes
shopping centers.
Spending on government building projects rose by a strong 0.9 percent to a
record of $273.2 billion. This increase reflected a 1.1 percent jump in spending
for state and local projects, which offset a 1.5 percent drop in spending on
federal building projects.
© 2006 Associated Press.
Editor's Note:
4. Applications to Buy and Refinance Homes Tumble
Applications for U.S. home mortgages declined last week after a four-week
increase in long-term interest-rates, data from an industry group showed
Wednesday.
The seasonally adjusted index of total mortgage applications dipped 3 percent in
the week ended Oct. 27 to 570.8, the lowest level in over a month, according to
the Mortgage Bankers Association.
Long-term, 30-year fixed-rate mortgage rates -- which drive the most common type
of home loan -- had climbed to 6.36 percent through Oct. 20 from 6.18 percent in
mid-September, the MBA said.
The rate, which typically leads application activity by several days, dropped to
6.24 percent in the latest week, it said.
The four-week moving average for the applications index was 586.1, down 2.6
percent on the week but above levels for most of the second and third quarters,
the MBA said.
The data had suggested to some analysts that the housing market may be leveling
out after rising interest rates and inventories of homes cooled sales through
the first half of the year.
The MBA's sub-indexes, however, on Wednesday showed that stability in the market
may be fleeting. The component index of home purchases declined 1.8 percent to
375.6, the lowest level of the current downturn, the MBA said.
The association's gauge of loan refinancing fell 4.5 percent to 1,709.2.
The slide in sales of existing homes, which represent some three-quarters of the
market, had not subsided as of September, according to data released last week
by the National Association of Realtors.
The pace of U.S. existing home sales slowed for a sixth straight month in September to an annual rate of 6.18 million units from a 6.30 million pace in August.
But sales of new homes unexpectedly jumped a second straight month in September as builders slashed prices, the Commerce Department said on Thursday.
© 2006 Reuters.
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