Warren Buffett’s Berkshire Hathaway gave the financial world something of a surprise yesterday with the news that the firm had built a $520 million stake in Synchrony Financial during the second quarter. Synchrony — once a unit of GE — is a market leader in issuing store-branded credit cards for retail partners. The firm also operates a payments network and makes loans (much like American Express, in which Berkshire is the largest investor).
“That’s something that’s difficult to replicate,” Arren Cyganovich, an analyst at DA Davidson & Co., said during a phone interview with Bloomberg on the dual roles. “So if you’re thinking about the competitors in the retail and private-label card space, there aren’t too many that have the capabilities that Synchrony Financial has.”
Plus, the sage of Omaha also likes a good buy — and Synchrony's stock price is down 18 percent in 2017, slumped due to concerns about risks tied to swelling consumer debt. That means buying up the share was something of a bargain investment — and Warren Buffett responded by snatching up 17.5 million shares as of June 30, according to a regulatory filing Monday.
Synchrony shares gained 4.4 percent to $30.95 on the announcement of the deal. Berkshire also has stakes in payments networks Mastercard Inc. and Visa Inc.
In the same filing Berkshire Hathaway also shared the news that it had exited its investment in GE, which was worth more than $300 million as of March 31. He previously sold a large portion of his GE stake in 2012.
“The outlook for GE has certainly soured,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, citing the recent departure of Jeff Immelt as chief executive officer. “The CEO essentially was forced to resign.”