> Warren Buffett Blog: Warren Buffett bullish bets on Aerospace and Titanium

Thursday, September 10, 2015

Warren Buffett bullish bets on Aerospace and Titanium

In August 2015, Warren Buffett’s Berkshire Hathaway bought Precision Castparts at a price of $235.00 per share, amounting to nearly $32.5 billion in cash. The details of the transaction are less important than what the billionaire from Omaha’s logic was behind the acquisition. By his own admission, he bought it at a high price—especially considering PCP’s 52-week low was $186.00 a share.

Buffett is clearly bullish on aerospace; and Precision Castparts is a world leader in the manufacturing of highly complex titanium alloys and other metal parts for that sector. Titanium casting is not for everyone. There are but a handful of specialists worldwide; PCP just happens to be the most important one. The company admits that the highly-specialized nature of its products and production processes have acted as a barrier to potential competitors. Not surprisingly, PCP ranks first or second in each of its markets and any would-be challenger would have to face massive investments just to catch up—let alone compete.