Buffett to invest $5 billion in Goldman

By Jonathan Stempel

NEW YORK (Reuters) - Warren Buffett's Berkshire Hathaway will invest $5 billion (2.7 billion pounds) in Goldman Sachs Group, in a major boost for the Wall Street bank from perhaps the world's best-known investor.

"It's a vote of confidence which is gold plated," said Michael Holland, a money manager at Holland & Co in New York. "You don't get better than this."

Shares of Goldman rose 8.1 percent after the announcement, while Standard & Poor's 500 futures gained 15 points. Goldman also announced plans to sell $2.5 billion of common stock.

Buffett is adding Goldman to a portfolio of investments at Berkshire that includes large stakes in a handful of major U.S. commercial banks.

On Sunday, Goldman won Federal Reserve approval to become a bank holding company, giving it easier access to financing and adding to speculation it might buy another bank.

This came after many investors questioned its business model amid this month's market turmoil, causing shares to fall 50 percent from their record set last Oct 31.

"Goldman Sachs is an exceptional institution," Buffett said in a statement. "It has an unrivalled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance."

Buffett is the second-richest American according to Forbes magazine, and built Berkshire into a $199 billion conglomerate by investing in undervalued companies with strong management.