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8 Stocks Warren Buffett Should Never Buy

One of the most disciplined investors of all time, Warren Buffett and Berkshire Hathaway (NYSE: BRK-B  ) (NYSE: BRK-A  ) stick to a specific set of rules with every investment that they make. It is this system that has allowed Buffett to deliver staggering returns over his illustrious career, and it also explains why he won't buy "it" stocks like Apple (NASDAQ: AAPL  ) , Tesla Motors (NASDAQ: TSLA  ) , and (NASDAQ: AMZN  ) . So, why change a working formula? Here are a few of the rules of the Warren Buffett way and eight investments the Oracle of Omaha would never make.

The 100 year rule
This is a phrase Buffett has used in letters to his shareholders to justify certain investments. Basically, he invests in industries that are virtually guaranteed to withstand the test of time. Take a look at Berkshire's current holdings, and you'll see a lot of insurance businesses, food manufacturers, banks, and construction companies, to name a few. People will always need to insure their lives and possessions, safe places to keep their money, homes to live in, and food to eat.

What does the company do?
If he doesn't understand what they do, he doesn't invest in it. When Buffett dismisses a new tech investment, he often gets called "an old guy who just doesn't get new technology." Well, that may be true, so why would he throw billions of dollars into it? Just because other people are?

Competitive advantage
To find out if a stock could be considered by Buffett, once it passes the other two rules listed, it must have an identifiable competitive advantage in its industry. Coca Cola has tremendous brand recognition. Wells Fargo has some of the highest-quality assets of any bank.

This is by no means an exhaustive list, and there are plenty of other things Buffett looks for when investing. However, by using these three simple rules, we can identify tons of very popular companies that Warren Buffett would never have any interest in buying. Here's a slideshow with a few examples...

The greatest thing Warren Buffett ever said
Warren Buffett has made billions through his investing and 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.

Follow along as we countdown the days until Berkshire Hathaway's annual shareholder meeting in Omaha, Nebraska on May 3. A handful of Fools will be attending the event and live chatting with other Fools around the globe! Click HERE to set a reminder for yourself about the live chat!

The previous articles in our "12 Days of Berkshire" series:
12 Reasons Warren Buffett Is an Incredible Investor and How You Can Learn From Him

11 Things in Your House Making Warren Buffett Money

10 Reasons Berkshire Hathaway Is the Best Stock You Can Buy

9 Warren Buffett-Approved Dividend Stocks

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 28, 2014, at 5:33 AM, CraigWPowell wrote:

    As for me AAPL is a good BUY, but not now:

  • Report this Comment On April 28, 2014, at 9:21 AM, tredadda wrote:

    So practically everything that the Fool recommends and in some cases has as a core stock are companies that Buffet would never invest in? That is one thing that always confused me about the Fool. They tout their way of investing as well as say listen to Buffet and follow his example (at least that is what is pushed so heavily on here) yet many times, like this article proves, those are on exact opposite sides of a stock.

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Matthew Frankel

Matt brought his love of teaching and investing to the Fool in order to help people invest better, after several years as a math teacher. Matt specializes in writing about the best opportunities in bank stocks, real estate, and personal finance, but loves any investment at the right price. Follow me on Twitter to keep up with all of the best financial coverage!

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