Not even Warren Buffett was immune to the stock market’s rampant first-half gyrations, as Berkshire Hathaway Inc. notched its worst first half in 18 years, with the shares skidding more than 16%. But only a fool would count out the great Oracle of Omaha, who has spent the past several months restructuring his company’s portfolio and is now ready to come out swinging for the year’s second half.

As Money Morning’s Horacio Marquez noted in his most recent “Buy, Sell, or Hold” feature, Berkshire Hathaway has had a tough start for the year.

The company’s net earnings for the first half were $3.8 billion – a 33% decline from the $5.7 billion reported for the same period last year. But even though the second quarter was weak – especially by Buffett’s standards – it showed marked improvement from the first three months of the year.

Berkshire reported about $1.6 billion in unrealized losses from derivatives in the first quarter. But after warning that derivatives contracts will often “swing wildly,” the company posted $689 million in derivatives gains in the second quarter.

Berkshire’s revenue actually rose 10% to $30.09 billion for the quarter.

But that’s not enough for Buffett, who has set about restructuring his company’s holdings. In the past few months, Berkshire has reduced its investments in Anheuser Busch Cos. (NYSE:BUD) and Trane Inc., and added positions in NRG Energy Inc. (NYSE:NRG), Ingersoll-Rand Co. Ltd (NYSE:IR), and Sanofi-Aventis (ADR:SNY).

According to filings with the U.S. Securities Exchange Commission (SEC), Berkshire in June reduced its stake in Anheuser Busch to 13.85 million shares, less than half the 35.56 million shares it held as of March 31. It’s likely the company received a tidy sum for its shares, as earlier that month InBev SA (PINK: INBVF) offered $65 a share for the American icon. Buffett admits to bailing on the Bud brand before InBev raised its offer to $70 a share, but AB was trading at close to $62 a share on June 30, much higher than the $47 a share the company was valued at in late March.

Also in March, Berkshire dumped its 10.9 million shares of Trane Inc. That stake was valued at more than $500 million as of March 31.

After unloading in the spring, Buffett treated Berkshire Hathaway to a $4-billion shopping spree over the next several months. By the end of the second quarter, Berkshire’s stake in French drug maker Sanofi Aventis had shot up 317,200 shares to reach 3.9 million. Berkshire also added 5 million shares of Ingersoll-Rand, and announced new holdings in NRG Energy, the second-biggest power producer in Texas. Berkshire had 3.24 million NRG shares as of June 30.

Even more interesting, in a move that highlighted Buffett’s bullishness on railroad stocks, Berkshire doubled its stake in Union Pacific Corp. (NYSE:UNP), taking its holdings from 4.45 million shares at the end of March to 8.91 million shares as of June 30.

Last year, Buffett and Berkshire road the rails hard. Buffett made his first move on Burlington Northern Santa Fe Corp. (NYSE:BNI) last April, acquiring nearly 40 million shares – or close to 11% – of the railroad. He then moved on to snap up 10.5 million shares of Union Pacific Corp., and 6.4 million shares of Norfolk Southern Corp. (NYSE:NSC).

Later in August, Berkshire went shopping again, loading on an additional 3.3 million shares of Burlington and another 6,000 in September. But Buffett didn’t stop there: He added yet another 10,300 shares of Burlington over the two-week period ending Jan. 22, bringing Berkshire’s total stake in the company to 18.2%.

Berkshire’s second-quarter acquisitions, which were disclosed in an SEC filing last week, are only a fraction of the $3.98 billion Berkshire spent on stocks in the April-June period.

Even if Buffett bought the shares at their highest second-quarter prices, which he almost certainly did not, the total cost would only have been about $260 million. That means more than $3.5 billion went into smaller amounts of unnamed stocks the company was not required to disclose.

Where that money went is anybody’s guess, but Buffett indicated in a recent interview with CNBC that a portion of it went into one of two stocks: Wells Fargo & Co. (NYSE:WFC) or American Express Co. (NYSE:AXP).

Wells Fargo stock has plummeted 22% in the past year, while American Express is down more than 37% in that time. However there may be some clues as to which stock Buffett really believes will rebound in some earlier comments he made.

“We’ll say at American Express… they are experiencing credit deterioration and they’re experiencing it sort of in all segments,” Buffett said earlier on CNBC’s Squawk Box. “So they’re seeing the rich customers slow down in payments, slow down in purchases.

“And American Express can describe that rather than I,” he added, “but I pay a lot of attention to that sort of thing. And incidentally, it will get cured at some time in the future, but right now the situation is getting worse and I would say that I don’t see any early end to that.”

That assessment doesn’t seem particularly favorable, particularly compared with comments Buffett made with regards to Wells Fargo just a few months ago.

“Wells Fargo stock was down last year,” Buffett said, “I don’t think the intrinsic business value shrunk. In fact, I said I thought it probably increased a touch.”

Berkshire already owns considerable stakes in both companies.

Source: Buffett Reignites Berkshire Hathaway with a $4 Billion Spending Spree

“I don’t think anyone should be surprised by Calpine’s announcement,” Gordon Howald, an analyst with Calyon Securities USA Inc. in New York, told Bloomberg News. Howald has a “buy” rating on NRG shares, but doesn’t own any. “If they were to accept the first bid as laid out, they would probably be doing their shareholders a disservice.”

Calpine has 60 power plants capable of producing 23,000 megawatts of electricity, while NRG maintains 49 plants with a total capacity of 24,120 megawatts. A successful takeover would double NRG’s capacity in the United States to about 45,000 megawatts, enough to power 36 million homes.

Despite rejecting the initial bid, Calpine stated it is examining whether “there is a basis for discussions between the two companies to explore a business combination,” The Associated Press reported. However, the company stressed that it’s possible no deal would ultimately result from the talks.

“We respect the Calpine Board’s decision but are disappointed that they have decided not to move quickly to deliver the benefits of our proposal to Calpine’s shareholders,” David Crane, NRG’s chief executive officer, said in a statement, Bloomberg reported.

The company remains interested in the deal, Crane added.

NRG would benefit from Calpine’s strong presence in California and its focus on cleaner burning natural gas. But there could be other interested suitors.

Other power companies that could throw their hat into the ring for consideration include Constellation Energy Group Inc. (CEG), Reliant Energy Inc. (RRI) and Mirant Corp. (MIR), James Halloran of National City Corp.’s (NCC) Private Client Group in Cleveland, an analyst who helps oversee $38 billion in assets, including about 13,500 NRG shares, told Bloomberg. A less likely possibility is Dynegy Inc. (DYN), Halloran added.

“There’s going to be a lot of negotiations in this,” Halloran said. “I think you’ll get at least one or two other possible bidders on it.”

Calpine shares closed up 25 cents on Friday, an increase of 1.10%, to close at $22.94. NRG shares also gained, closing up 87 cents for the day, an increase of 2.13%, at $41.68.

Source: Calpine Rejects NRG Takeover Bid

NRG acknowledged Wednesday that it made the initial $22.98 a share offer on May 14. NRG said the deal assumes Calpine had 500 million fully diluted shares outstanding as of May 13. That calculation would value all of Calpine at $11.35 billion.

NRG offered to pay 0.534 shares for each share of Calpine, the company said in a statement. Based on NRG’s Wednesday closing price of $42.51, the deal values each Calpine share at $22.70, a 6.7% premium to Calpine’s closing price of $21.20.

“This is quite simply, the right deal, at the right point in time, between the right partners,” David Crane, NRG’s chief executive officer said in a statement.

After over-expanding during a period of high electricity prices, the company was unable to carry its heavy debt load as prices began to drop in 2002 and was forced into bankruptcy in 2005.

Calpine laid off more than 1,000 employees – a third of its workforce at the time – and restructured more than $20 billion in debt. Analysts anticipate a buyout will result in more job cuts as NRG aims to lower annual expenses by eliminating overlapping positions.

NRG spent seven months operating under Chapter 11 bankruptcy itself in 2003. NRG said that it is “becoming a full taxpayer four years out” of its own troubles, and the combined company will be able to make the best use of Calpine’s $5.1 billion of net-operating-loss carry-forwards, Dow Jones reported. While Calpine is still putting together its post-Chapter 11 team, NRG says it has strong management immediately available.

“We believe Calpine’s lack of a management team, plus NRG’s established (and in, our view, well-regarded) management team, will likely weigh heavily on Calpine’s board as it deliberates negotiations,” NRG said.

Right now, Calpine has 60 power plants capable of producing 23,000 megawatts of electricity, while NRG maintains 49 plants with a total capacity of 24,120 megawatts.

The takeover would double NRG’s capacity in the United States to about 45,000 megawatts, enough to power 36 million homes.

NRG would also benefit from Calpine’s focus on cleaner natural gas fuel, as lawmakers seek to reduce carbon-dioxide emissions. Calpine is the largest U.S. producer of electricity from gas-fired plants, Bloomberg News reported.

The Lieberman-Warner climate security act, a bill proposed by senators Joseph Lieberman and John Warner aims to reduce emissions by 66% from 2005 levels by 2050. The Senate is scheduled to begin debate on the measure next month.

Source: NRG Looks to Electrify its Business with $11.3 Billion Calpine Takover