Goldman gains Buffett backing

Goldman Sachs Group Inc won the backing of Warren Buffett, the world's preeminent stock-picker, as the Wall Street firm seeks to raise cash from investors whose faith in the investment-banking business model has been shaken.

The bank soared 11 percent to $138.17 in German trading yesterday. For Goldman, the endorsement came at a price. Berkshire Hathaway Inc, led by the 78-year-old billionaire, is buying $5 billion of perpetual preferred stock with a 10 percent dividend. Berkshire also gets warrants to buy $5 billion of common stock at $115 a share at any time in the next five years. The common stock closed on Tuesday at $125.05, providing Buffett with an instant paper profit of $437 million.

"It's a hell of a deal for Buffett," said Brad Hintz, an analyst at Sanford C. Bernstein & Co who rates Goldman stock "market perform." "The key thing for Goldman is making it through the credit cycle, and they're doing the right stuff."