Legendary investor Warren Buffett has purchased more than 4
million shares of Tyler, Texas-based MSO TCA Cable TV Inc.
Buffett's stake in the company amounts to 8.1 percent
of its outstanding shares. Buffett, chairman of Berkshire Hathaway Inc., announced his
holdings in the company in a 13-G filing with the U.S. Securities and Exchange Commission
last Wednesday.
News of the Buffett investment lifted TCA shares by 17
percent last Wednesday, or $6.375, and they closed that day at $43.125 apiece.
Based on that stock price, Buffett's shares are worth
about $172.5 million.
After the initial euphoria over the disclosure of
Buffett's investment, TCA shares declined slightly last Thursday to $41.75 per share
in morning trading, rebounding to $43.50 by early afternoon. The stock is trading near its
52-week high of $44.12.
Murray Arenson, an analyst for Dallas-based Hoak,
Breedlove, Wesneski & Co., said the Buffett investment is a further validation of
TCA's business plan.
"It indicates some success on the part of [TCA
chairman, president and CEO] Fred Nichols and the people at TCA," Arenson said.
"What they owe to their shareholders is to get people owning the stock that are not
going to dump it when times get rough. Warren Buffett is a long-term sort of
investor."
Buffett -- known as the "Oracle of Omaha" for his
knack for finding undervalued companies -- doesn't usually invest in cable stocks. In
fact, the TCA investment may be the Nebraskan's first entrance into the industry.
Arenson said that according to TCA, Buffett didn't get
involved in the cable industry because he was uncomfortable with the financial structure
of the business -- characterized by class-A and class-B shares, supervoting shares and
excessive debt levels. However, it appears that TCA has changed his mind about the sector.
TCA is different from other cable stocks: It reports
positive net income, and it has lower debt than most MSOs.
With his purchase of the 4 million shares, Buffett becomes
TCA's fourth-largest shareholder, behind Louise Rogers, New York-based Chieftain
Capital Management and Boston-based Fidelity Management. However, Buffett is expected to
be strictly a passive investor in the company.
Bob Roseman, vice president of business development at TCA,
could not comment on why Berkshire Hathaway picked TCA as one of its first forays into
cable, but he added that TCA was pleased with Buffett's interest in the company.
"These guys are very astute investors, and they have
an excellent record in the many different types of industries that they invest in,"
Roseman said. "All we can say is that we are flattered, and we appreciate the
interest."
