Legendary investor Warren Buffett fired his elephant gun overnight.
But before you think he's suddenly started shooting at animals, you can relax.
His company Berkshire-Hathaway announced that it was buying Precision Castparts Corp (PCP) for US$32.3 billion in cash, in its biggest deal ever.
Buffett has in the past referred to giant companies worth billions as 'elephants', and with Berkshire generating close to US$20 billion in profit last financial year, needs to make large investments to 'move the needle'.
Buffett is already familiar with PCP. One of his two investment managers, Todd Combs, bought shares in the company back in 2012, and Buffett clinched the deal in a meeting with PCP chief Mark Donegan in July 2015. PCP makes parts for aircraft and aerospace as well as power and general industrial sectors.
The last 'elephant' deal before PCP was the October 2014 purchase of Van Tuyl Automotive, the fifth-largest dealership group in the US, with more than US$8 billion in annual sales. The largest deal before PCP was railways group Burlington Northern Sante Fe for US$A26.7 billion.
Berkshire will use around US$23 billion of its own cash and US$10 billion of debt to fund the acquisition of PCP, but will still have plenty of cash left in the bank. Reports suggest Berkshire will have around US$40 billion in cash left on its balance sheet after the deal, but don't expect Buffett to fire the elephant gun anytime soon.
As Buffett told CNBC,
"This takes us out of the market for an elephant. We'll be left with over $40 billion probably of cash when we get all through [with PCP]. But I like to have a lot of cash at all times. This means we have to reload over the next 12 months or so."
Showing the long-term Buffett still takes despite his 83 years of age, he also told CNBC, "We're going to be in this business for the next 100 years."
When you consider most investment bank analysts can't see beyond the next three to six months and most traders are looking at investments in terms of hours and days, that gives you some perspective.
If you have ever wondered who's got the best investing strategy, you have your answer.
