Buffett Purchase of PS Group Stock Sends Shares Up
Well-known investor Warren E. Buffett has acquired an 11% stake in PS Group, the San Diego-based holding company that in 1987 sold its main operating unit, Pacific Southwest Airlines, to USAir.
Buffett acquired the PS Group stock through Berkshire Hathaway, an Omaha investment company that he controls. Berkshire Hathaway has diverse investments that include a 17% interest in Capital Cities/ABC, a 45% interest in GEICO insurance company and an 8% interest in Gillette. Buffett owns 41% of the stock in publicly owned Berkshire Hathaway.
News of the stock purchase by Buffett, who is perceived on Wall Street as a shrewd investor, sent PS Group shares up $1.875 to close at $36.625 in New York Stock Exchange trading on Friday.
Buffett’s purchase totaled 603,275 shares, or 11.04% of total PS Group stock outstanding. The shares were acquired between March 16 and April 25. In a filing with federal regulators, Buffett said the stock was bought for investment purposes only.
PS Group’s main businesses are aircraft leasing, fuel distribution and a travel agency business. The company has a 71% interest in a recycling company called Recontek that, according to stock analyst Irving Katz of Thomas Green/San Diego Securities, holds PS Group’s biggest growth potential.
For fiscal 1989, PS Group reported a $2.9-million loss on revenue of $264.6 million, contrasted with a profit of $44.1 million on revenue of $331.8 million for 1988. The 1988 revenue figure includes a credit of $105.5 million from the net gain on termination of the PS Group retirement plan.
PS Group executives had no comment Friday on Buffett’s investment.
Buffett is only the latest of several large investors to be attracted to PS Group and to what some analysts say is its hidden value, particularly in its aircraft leasing business, Katz said. Aircraft leasing generated 28.2% of PS Group’s 1988 profit while representing only 19% of its revenue.
The airplanes that PS Group leases may be worth significantly more than indicated on its balance sheet, Katz said.
Major PS Group shareholders include Pacific Partners, a Los Angeles investment firm headed by PS Group Chairman J. D. Guerin that owns 12.8% of outstanding shares; Michael Price and his Heine Securities, owners of 15.9% of PS Group shares, and a three-member group consisting of Tweedy, Browne Co. LP; TBK Partners and Vanderbilt Partners, which owns 19.3%.
FMR Corp., which operates the Fidelity investment management firm, owns 11.3% of PS Group stock, according to a proxy statment mailed to shareholders for the annual meeting, to be held May 22 in Del Mar.
As relatively few shares of PS Group are traded on a daily basis, Katz said Berkshire Hathaway probably acquired the stock from one of the other large institutional investors. According to the government filings, Berkshire Hathaway acquired 330,475 shares, or more than half its PS Group holding, in a single April 25 transaction. The seller was not disclosed.
