Warren Buffet's Berkshire Hathaway (NYSE:BRK) revealed its portfolio today in a mandatory Schedule 13F filing with the SEC. The regulatory filing showed the billionaire investor increasing his holdings in banks, including Bancorp, which he was rumored to be considering for acquisition. Investors are carefully watching the investors actions as it could mean an opportunity for them to piggyback on his famous market knowledge.

Buffet added to his stakes in three large U.S. banks, including Wells Fargo, U.S. Bancorp, and Bank of America. He also disclosed a new stake CarMax Inc. (NYSE:KMX), which surprised many investors since the auto industry is not expected to turn for some time now. The timing is also questionable as the company appears to be headed towards a recession and car loans are becoming more scarce.

Wells Fargo made the news in another way today after its CEO said that its exposure to CDO's and asset-backed commercial paper is minimal. He also noted that the U.S. housing market is now the worst since the Great Depression and is far from over. This dropped many bank stocks while Wells Fargo traded higher on news that its own exposure was limited.

The banking market is still being hit hard from subprime and credit market concerns that have caused deep losses in many investment banks like Merrill Lynch and even brokerages like E*Trade. Whether or not we have hit a bottom remains to be seen, but it appears that Warren Buffet may be predicting a bottom coming relatively soon given his large move.

In the end, this is good news for the banking industry and very interesting news for investors who are sitting on the sidelines. Buffet has been involved with the banking world through several crisises like this one (read: LTCM) and has experience in the industry. Combined, these factors make the banking industry worth watching closely!

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Billionaire investor Carl Icahn acquired stakes in Genzyme Corporation(NDAQ:GENZ) and Harrah's Entertainment Inc. (NYSE:HET) after selling his stakes in Kraft Foods Inc. (NYSE:KFT) and Clear Channel Communications Inc. (NYSE:CCU), according to a Schedule 13F filing released Wednesday. Shareholders are hoping that the activist investor will work to unlock value in some of these new investments.

Icahn also reported new stakes in several video game providers (TTWO, PLCE), medical companies (MOGN, CYBX, ACOR, CRA, ABI, LSR), and gas and oil companies (CMT, TLM). Interestingly, he sold off his stake in aluminum producers (AA, AL). Meanwhile, he significantly increased his stake in larger companies like BEAS, MOT, REGN, and APC.

Carl Icahn is well known in the investment community as an activist investor willing to do what it takes to unlock value in his investments. The investor has ousted several CEOs and enforced "strategic alternatives" like share buybacks and outright sales. It is likely that at least his stake in BEAS will result in an activist situation. Combined these factors make Carl Icahn worth watching!

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Delta Airlines (NYSE:DAL) announced that it has formed a special board committee to evaluate strategic options after being pressured by an activist hedge fund. Pardus Capital Management, which holds stakes in Delta and United, sent a letter to Delta Management Tuesday renewing its call for airline consolidation and advocating a Delta-United merger. Shareholders pushed up the stock of both companies in response.

Pardus noted in their letter that they believe it is, "imperative that Delta enter into a merger transaction with another carrier given the rapid rise in fuel prices and increased risk to the business as a stand alone entity." The letter came in response to word that Delta had consulted industry experts, including a former Continental Airlines chief executive. Some believe that this may have caused concern that Delta was looking elsewhere for merger possibilities.

Pardus insisted that a merger between Delta and United could result in $585 million in synergies along with other benefits that would result in a combined company stock worth $53 per share - a 75% improvement over today. The hedge fund even offered to support the Delta management team leading the strategic direction of the combined entity.

"We have been consistent in our public statements that Delta believes that the right consolidation transaction could generate significant value for our shareholders and employees and that strategic options should be evaluated," said Delta in a statement. "With oil at over $90 a barrel, this analysis takes on a heightened importance as we factor those prices into our long-term planning process."

In the end, this is all good news for Delta shareholders and may finally mark an end to the problems that have plagued the company before it was forced to declare bankruptcy and emerge in debt. These factors make DAL a stock worth watching closely!

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Och-Ziff Capital Management (NYSE:OZM) became yet another public hedge fund after shares opened even, priced in middle of their range at $32.00 per share today on the NYSE. Wall Street appears to remain skeptical as to the viability of a public hedge fund after Blackstone's blockbuster initial offering in June, which was followed by a series of negative tax law changes.

Och-Ziff Capital Management was founded in 1994 by former Goldman Sachs trader Daniel Och and the Ziff publishing family. The firm institutional alternative asset management firm and an alternative asset manager has approximately $26.8 billion of assets under management for over 700 fund investors. It invests in equity securities, convertible securities, and debt instruments. It also trades in high-yield debt, options futures, forwards, swaps, other derivatives, private securities and assets, real estate entities, and other investments.

Och-Ziff posted 2006 net income of $588 million on revenue of $1.01 billion after returning 16.7 percent annually to investors over its 13-year history. The company is formed as a limited partnership, which is a tax structure that currently enjoys a lower tax rate. Instead of being charged a regular income tax, the managers can collect their income taxed under the capital gains tax. However, tax law has changed and this company may face higher taxes after a few years of being grandfathered.

In the end, Och-Ziff is a successful hedge fund with excellent returns. However, risks associated with potential tax liability just over the horizon combined with the bad press many hedge funds have received over excess fees may weigh into the share price. Regardless, this stock is definitely one worth watching!

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Kraft Foods (NYSE:KFT) bowed to activist pressure last week by appointing two Peltz-approved directors to the company's board. The move follows pressure from the activist to spin-off the company's Post cereals and Maxwell House Coffee divisions to unlock shareholder value. Shares rose marginally on the news as shareholder are hoping that such initiatives now take hold.

Kraft reached an agreement to appoint two new directors to the company's board in exchange for a "standstill agreement" that prevents Peltz from publicly criticizing management or the growth strategy of the company for the next two years. The activist also gave up any rights to solicit proxies and agreed to vote for incumbent directors during the next election.

"We see the agreement as a pragmatic path forward for Kraft," said a spokeswoman. "Kraft adds two directors, Trian pledges support for our board, and the agreement clarifies our relationship with Trian."

Peltz has been targeting the food industries recently, targeting not only craft but also Cadbury Schwapps. The activist investor is known for sending whitepapers to the company documenting his reasoning for certain actions. And while his plans for Kraft were never made public, there was a lot of speculation that the plan called for a spin-off of two key business segments.

In the end, this is good news for shareholders as it means Peltz's plan will likely receive serious consideration. If implemented, we can assume that it will result in substantial value being unlocked for shareholders in the long-term. Combined, these factors make KFT a stock worth watching closely!

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Goldman Sachs (NYSE:GS) shares are up over five percent today after the investment banking firm announced that it does not expect to take any significant asset write-downs this quarter. The news also boosted confidence in other financial stocks around the market, including Bank of America. Many investors are hoping that this will signal the end of the credit crunch.

"We're convinced we have a pretty good grip on [CDO and mortgage] valuations," said Blankfein at the Merrill Lynch Banking & Financial Services Conference after some investors voiced concerns about Goldman's valuations. The CEO assured investors that it has properly valued its assets. In fact, when the firm isn't certain, it has traders execute test trades to assign a value that has some merit.

Interestingly, Goldman also has a bearish view on the US mortgage markets where rising default rates and a lack of buyers has caused steep declines in mortgage values and derivatives like CDOs. The firm reported solid gains on its bets against the mortgage markets and indicated its belief that things will likely get worse before they get any better.

In the end, it appears the Goldman made the correct bet on the mortgage markets by positioning itself as net short. Whether or not the firm's valuations are correct remains to be seen, but it appears that the only factor they fail to fully consider is liquidity (after all, test trades don't account for that). Combined, these factors make GS a stock worth watching!

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Kellwood Company (NYSE:KWD) shares are up nearly ten percent today after Sun Capital threatened to take its $544 million buyout offer to the company's shareholders unless the board would reconsider its offer. Shareholders are clearly hoping that the company will either accept the offer or the firm will bring a higher buyout offer on the table.

"Our strong performance is to acquire Kellwood in a friendly negotiated transaction, but we are prepared to take all the necessary steps to protect the value of our existing 9.9% ownership position in Kellwood, including making a $21-per-share offer directly to Kellwood's other shareholders," said Sun Capital in a letter to the board.

Since Sun Capital did not increase their buyout price at all, it is very unlikely that we will see a response from the company. The next step would therefore be a tender offer by Sun Capital during which they would offer to tender shares for cash at $21/share or a proxy contest in which they would bring the issue to vote at the company's next annual meeting.

Kellwood shares dropped to a 52-week low of $14.21 after reporting severely damaged earnings earlier this year. The first Sun Capital offer came in shortly after this occurred and shares are still down over 50 percent on the year. Ultimately, this means that many shareholders are underwater on their investments and may not be interested in selling if the company can present a compelling long-term value proposition.

In the end, it will be interesting to see what becomes of this situation. It is highly uncommon for a private equity firm to go through with a hostile tender, but it will likely be their only option. Combined, these factors make KWD a stock worth watching!

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PDL BioPharma Inc. (NDAQ:PDLI) shares are down five percent today after Daniel Loeb's Third Point disclosed that they sold the rest of their stake in the company. Last month, the activist hedge fund announced that it cut its stake from 9.7 to 5.1 percent but noted that it was encouraged by the board's plan to sell the company - an effort that it spearheaded.

Many shareholders have sold out of PDLI as it made the WSJ's largest outflow of capital. The selling on strength suggests that some investors may be concerned that a potential deal may have trouble in today's markets. Several deals have fallen through after most banks have included clauses in their financing packages that let them get out of deal early if markets get worse.

PDLI minus their number one activist shareholder may now be tempted to abandon its sale process. This is especially true after the company announced narrowed losses in the third quarter. The company continues to lose money as a result of restructuring charges, but did manage to improve bottom line results. There have also been several layoffs and other efforts to reduce costs.

In the end, the situation may go downhill from here. Shares have rallied substantially since the hedge fund got involved and there may now be a sideways trading period after they exited amid a run-up. Whether or not the company will be sold remains to be seen, but this is still a stock that is definitely worth watching over the next few months!

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Wendy's International (NYSE:WEN) shares are up marginally today despite news that its pending sale process may be in jeopardy due to continued turmoil in the credit markets, according to an article in the New York Times. Buyers are reportedly concerned that any financing provided by major banks would be highly conditional and include several clauses that buyers may find unattractive.

The banks financing the deal sent term sheets to prospective buyers two weeks ago but have not yet made any formal commitments. One of the largest problems with the deal is a reported loophole that would allow banks to withdraw the financing if the credit markets deteriorate. Consequently, Wendy's said it may attempt to line up additional banks for its financing efforts.

Bids are due at 5pm EST today but some are predicting that the Wendy's sale may be forced on hold until the credit markets improve, which could be six months or longer. This may anger activist investor Nelson Peltz who had not only been hoping to purchase the company but is also one of its largest shareholders. In the end, this stock is definitely one worth watching!

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E*Trade Financial Corporation (NDAQ:ETFC) may become yet another victim of the subprime crisis after a Citigroup analyst downgraded the stock to a "Sell" and lowered his price target from $13 to $7.50. The analyst said that there's a 15 percent chance that E*Trade will declare bankruptcy and said management may be forced to sell loans and securities at significant discounts.

The Citigroup analyst expects the value of E*Trade's home mortgage holdings to fall significantly and lead to bigger-than-expected write-downs in the fourth quarter. It's $3 billion portfolio of asset-backed securities contains $450 million worth of collateralized debt obligations and second-lien securities. Meanwhile, the company is also facing a SEC informal inquiry related to issues with its loan and securities portfolios.

E*Trade responded this morning by saying that it can absorb an immediate write-down as high as $1 billion and still remain well capitalized. The company also acknowledged that "news in the market" will get worse before it gets better as the company takes "prudent measures" to manage its balance sheet. The company expects additional write-downs to this end.

The Citigroup analyst noted that this continued negative news flow about charges resulting from its mortgage and CDO exposure, an SEC inquiry, and continued deterioration of its financial condition, all increase the likelihood of significant client attrition. However, the company noted that its client base did increase by four percent during October.

In the end, this is bad news for shareholders that only promises to get worse before it gets any better. While the company may be safe from any liquidity issues, these combined problems may cause problems with customers and impact future growth. However, if the company can turnaround, this stock could end up becoming a great value play!

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