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The Stock Market Is Soaring as Berkshire, Uber Make Big Buys

By Dan Caplinger – Updated Jul 6, 2020 at 1:52PM

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Investors are shrugging off worries about the COVID-19 pandemic.

Investors came back from the holiday weekend in a good mood, and they've apparently declared independence from any serious concerns about a rise in COVID-19 cases in some key states across the nation. Some of the bullishness came from overseas, where countries that have done a far better job at containing the coronavirus pandemic are starting to look more favorably on their economic prospects. Just before 11 a.m. EDT, the Dow Jones Industrial Average (^DJI) was up 376 points to 26,203. The S&P 500 (^GSPC -1.02%) gained 47 points to 3,177, and the Nasdaq Composite (^IXIC) picked up 215 points to 10,424.

One sign of optimism in the stock market is that companies are looking at opportunities to make strategic acquisitions. Berkshire Hathaway (BRK.A -1.04%) (BRK.B -1.09%) has been on the prowl for good purchases for a long time, and it finally found one over the weekend. Meanwhile, Uber Technologies (UBER 1.88%) got the green light to move forward with an acquisition of its own that should help it boost its market share in a key industry niche.

Buffett's cooking with gas

Berkshire Hathaway shares were up about 2% on news that Warren Buffett's insurance giant has found a target on which to deploy some of its vast cash hoard. Berkshire will pay $9.7 billion to purchase the natural gas transmission and storage business of utility company Dominion Energy (D -4.42%), which will involve about $4 billion in upfront cash payment and the assumption of the natural gas utility's debt worth about $5.7 billion.

The Berkshire Hathaway Energy subsidiary will acquire more than 7,700 miles of natural gas transmission lines, allowing it to move 20.8 billion cubic feet of natural gas every day. Dominion will also sell its rights to 900 billion cubic feet of operated natural gas storage capacity, of which about 40% is owned outright. The Berkshire unit will buy a 25% ownership stake in the Cove Point liquefied natural gas export, import, and storage facility in Maryland as well, with Dominion retaining a 50% stake.

Welder wearing heavy gear working on pipeline

Image source: Getty Images.

Bill Fehrman, who runs Buffett's energy subsidiary, was pleased with the deal. The move should help the company expand in some valuable markets in both Eastern and Western states, as well as giving it more international scope.

Berkshire still has well over $100 billion in cash to deploy, so the Dominion deal doesn't entirely solve Buffett's investment challenges. Nevertheless, investors seem to be pleased that the Oracle of Omaha found a deal to put at least some of Berkshire's cash to work.

Uber finds a 'mate

Shares of Uber Technologies were higher by 5% Monday morning. The ride-hailing service made good on its promise to boost its delivery business, even if its eventual partner wasn't necessarily the first company it had in mind.

Uber will pay $2.65 billion to buy food delivery rival Postmates, which is privately held. Postmates was reportedly considering going public to take advantage of a strong initial public offering (IPO) market, but instead it chose to avoid the hassle and uncertainty of tapping the public markets directly by selling out to the company behind the competing Uber Eats service.

The move came shortly after Uber failed in its attempt to purchase the much larger Grubhub, which instead chose to sell itself to a European food delivery business. Uber hopes that, with the coronavirus pandemic having hurt its primary ride business but boosting the amount of food delivery, the acquisition will help it preserve its growth.

Uber has recovered much of its lost ground, but even after today's rise, it's still well below its best levels from early 2020. Shareholders hope that buying Postmates will give Uber the confidence it needs to weather the COVID-19 storm and keep moving forward.

Dan Caplinger owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Dominion Energy, Inc and Uber Technologies and recommends the following options: short January 2021 $200 puts on Berkshire Hathaway (B shares), long January 2021 $200 calls on Berkshire Hathaway (B shares), and short September 2020 $200 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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Stocks Mentioned

Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$416,300.00 (-1.04%) $-4,367.49
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$276.31 (-1.09%) $-3.05
Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
UBER
$29.73 (1.88%) $0.55
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$30,273.87 (%)
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,744.52 (-1.02%) $-38.76
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,148.64 (%)
Dominion Resources, Inc. Stock Quote
Dominion Resources, Inc.
D
$65.96 (-4.42%) $-3.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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