Are tools, iron in Warren Buffett’s sights?

NEW YORK (Reuters) – Warren Buffett’s hunt for a large acquisition could persuade to targets like Eaton, Illinois Tool Works or Cliffs Natural Resources, every part of of which seem to fit his fresh preference for growth in industries outside of his core insurance unit.

Using Thomson Reuters StarMine facts, Reuters Insider compiled a list of greater degree of than 80 companies that met Buffett’s basic criteria — to wit industry leaders with strong balance sheets that are advantageous on the cheap.

Names like ITW, Cliffs and Eaton conformation on the list, along with admirable-profile international names like Rolls-Royce Group and AkzoNobel.

All of them are mercantile at enough of a discount to analysts’ expected earnings growth for the next five years that Buffett could pay a 20 percent guerdon and still be getting value in the deal.

“He for ever wants a simple defensible durable craft that will still be here and di~ery be on top of its amusement in 25 years,” said James Armstrong, president of Henry H. Armstrong Associates, that manages about 0 million, around a furnish with ~s of which is invested in Berkshire.

The Reuters Insider analysis focused on companies with market capitalizations in the billion to billion row that meet Buffett’s publicly specified criteria for deals, including a narration of profitability and little debt.

MORE CAPACITY TO DEAL

Buffett made a spot earlier this month in buying lubricant manufacturer Lubrizol Corp for billion, extending the trend of Berkshire Hathaway’s fresh investments in basic industries.

The deal is Berkshire’s biggest because that it bought Burlington Northern Santa Fe for more than billion in late 2009, further Buffett is still on the chase for big deals.

In Berkshire’s occurring once a year report, Buffett said he is in successi~ the lookout for possible acquisitions — form references to going big-game hunting with an elephant gun.

The social meeting had amassed a cash pile of well-nigh billion by the end of continue year. When Goldman Sachs buys preferred shares back from Berkshire, the assurance company will pick up an superadded .5 billion.

“Lubrizol changes his acquisition outline by zero,” said Glenn Tongue, provident partner who helps manage around 0 the masses at T2 Partners.

Tongue estimates that rear the Lubrizol deal, Berkshire will continually have more than billion of cash on hand at the end of 2011 whether the company does not do at all more acquisitions.

“He characterized the acquisition drill as elephant hunting. Lubrizol is not an elephant — I wouldn’t have ~ing surprised if he announced an acquisition larger than Burlington Northern this year,” Tongue declared.

SPECIFIC CRITERIA