Can you top this one?
Finova was one of the nation’s
largest finance companies. When the stock fell from the mid $40 level in 1999
to $5. in 2000, Warren Buffett (BRKA) teamed up with Leucadia National (LUK) and
formed “Berkadia” for the sole purpose of rescuing Finova. It looked like such
a no-brainier that I loaded up on the shares. The trade would not have been
appropriate for most of our managed accounts clients so (thankfully) the mistake
wasn’t spread around. Here’s what happened.
It Ain’t Over For Finova”
Finova was sinking to around
$3 a share when the announcement of Buffett’s multi-billion dollar commitment
was announced. News headlines carried the optimism of Buffett’s involvement,
and I doubled my position in the common shares. Everything seemed to be going
well, when suddenly the horrific events of 9-11-01 changed everything,
especially for the various industries that Finova had financed. I’m talking
specifically about the travel and the airline industries, which made up the
majority of Finova’s paper. Quickly, Mr. Buffett withdrew from his additional
Finova commitments exercising a “war time withdrawal option” he had wisely
included in his contract with Finova’s board. By the time the NYSE re-opened,
it was “over for Finova” and I lost most of the money…
The lesson learned here is
timeless…The higher up you go to get your information, the more you stand
to lose. Let the market, not the news determine what the future holds.