The Most Important Things to Remember About the Stocks Warren Buffett Buys

Much has been made about the Berkshire Hathaway addition of General Electric, but it turns out the additions to USG and DaVita Healthcare Partners were worth more to Warren Buffett.

Feb 23, 2014 at 1:30PM

The world now knows what stocks Warren Buffett and Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) were buying in the fourth quarter, but that's not the whole story. 

Perhaps the most attention-grabbing thing was the massive increase in Berkshire's position of General Electric (NYSE:GE). Buffett and team increased the holding by almost 17 times, adding almost 10 million shares, which is seemingly a staggering vote of confidence in favor of the company.

However, a look at the percentage increase can be distinctly misleading and present a broad misunderstanding of what companies Buffett and his lieutenants were actually most active in buying and selling during the quarter.

As you can see in the chart below, while the additional shares of GE were by far the largest percentage gain, on a raw dollar basis, it was actually only fourth largest:

Source: Company SEC Filings. 

In no way should this discount the significance of the additional purchase of GE, as a $280 million investment is not something to be shrugged off. But the addition to the positions of DaVita Healthcare Partners (NYSE:DVA) and USG Corp (NYSE:USG) were actually worth more.

First glance can be deceiving
You also may be wondering why the additions of USG and DaVita are noteworthy, but the $2.2 billion addition of Goldman Sachs is not. The Goldman addition was worth roughly 1.5 times more than the other eight companies combined.

Buffett Coca Cola

Source: Coca-Cola.

However, the position in Goldman is actually not a new purchase at all, but instead a conversion of his profit from his existing investment in Goldman Sachs preferred shares as well as warrants to buy $5 billion more, which was made during the financial crisis in 2008. 

The news Buffett would be taking his profit on that deal in the form of the common stock of Goldman Sachs was first revealed more than four and a half months ago at the end of September. While Buffett did take his profit in common stock and not in cash; however, it is hard to classify the addition of Goldman Sachs as a huge bullish sign for the Wall Street giant.

There is always much to learn from Warren Buffett's decisions to buy and sell shares of companies Berkshire Hathaway owns, but it is critical to see a simple glance at the holdings does not always paint the entire picture.

Why Buffett made the moves he did
The filings will tell us what Buffett bought and sold, but we also want to know why did it. And the reality is, Warren Buffett has made billions through his investing and thankfully, he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Patrick Morris owns shares of Berkshire Hathaway and General Electric Company. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway and General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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