Buffett Doubles Down; Icahn Likes Netflix

Yesterday's market gremlins stayed at home as the volatility that one might have expected after the markets' historic two-day weather closure failed to materialize. In fact, the Dow Jones Industrial Average (INDEX: ^DJI  ) and the broader S&P 500 (INDEX: ^GSPC  ) ended yesterday essentially unchanged (the magnitude of change was less than 0.1%).

The macro view
Warren Buffett is adding to his "bet" on a housing recovery, as Berkshire Hathaway (NYSE: BRK-B  ) will become the majority owner of a chain of franchised real-estate agencies in cooperation with another value-oriented investor: Brookfield Asset Management (NYSE: BAM  ) . The network will operate under the name of Berkshire Hathaway Home Services. Although Brookfield is contributing a network of 53,000 real-estate agents acquired from Prudential Financial (without the rights to the Prudential name), Berkshire Hathaway Home Services is already the country's second-largest full-service residential brokerage firm.

Armed with what is, for all intent and purposes, an infinite time horizon and an optimistic outlook regarding the long-term economic prospects of the U.S., this type of bet is right in Buffett's wheelhouse.

The micro view
According to an SEC filing, experienced activist investor Carl Icahn has taken a 10% economic stake in Netflix (Nasdaq: NFLX  ) , most of which was acquired in the past week. In the filing, Icahn suggests that "Netflix may hold significant strategic value for a variety of significantly larger companies." The market's response was unambiguous, as investors sent the shares up 14% yesterday -- rightly so, in my opinion, as Icahn has an excellent nose for value.

Earlier in October, Fool analyst Jim Mueller wrote: "Buying out-of-favor companies can be a very lucrative pursuit for the patient investor. With 600 million potential customers around the world, Netflix should again soar high." Click here to request his premium report, along with a full year of updates on this stock's story.

Alex Dumortier, CFA, has no positions in the stocks mentioned above; you can follow him @longrunreturns. The Motley Fool owns shares of Berkshire Hathaway and Netflix. Motley Fool newsletter services recommend Berkshire Hathaway and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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