By Melly Alazraki (DailyFinance)
Each quarter, investors and the media await the latest filing from Warren Buffett’s Berkshire Hathaway to see what changes the Oracle of Omaha made to his portfolio. This time, the report revealed a new investment in payment processor Fiserv.
As of June 30, Berkshire reported a 4.4 million-share stake in Fiserv, valued at $200.9 million. Based on Monday’s closing price, the Fiserv stake was valued at about $220 million. Fiserv provides info-tech and electronic-commerce systems to financial and insurance companies. Services include electronically posting checks, opening accounts and tracking loans.
Despite its client base in the financial and insurance industries, Fiserv has managed its operation reasonably well during the financial crisis and recession, increasing its profits primarily through cost-cutting.
In its most recent quarterly report, Fiserv posted an adjusted profit of $1 per share, up from 90 cents per share in the previous year, and above analysts’ estimates of 96 cents per share. Revenue rose to $1.02 billion from $1 billion in the year-ago quarter, topping analysts’ estimates of $1.01 billion. Revenue from processing and services, which accounts for the bulk of the company’s business, rose 3.4%, while product revenue fell 3.5%. Margins continued to improve in the quarter.
But while improved earnings, high margins and good management are definitely requirements for a Buffett investment, they’re not enough. Fiserv also boasts a 37% market share in account processing, and according to Fool.com, nearly 70% of U.S. Internet banking transactions run through one of the company’s technologies. And with its low capital needs, it’s a cash-flow generator, Barron’s adds. Taking it all into account, Fiserv sounds like a classic Buffett investment.