8 Stocks Warren Buffett Should Never Buy

When you look at Berkshire's portfolio, it's easy to figure out why Warren Buffett hasn't bought these stocks yet

Apr 25, 2014 at 7:33AM

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 Amazon.com (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

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, Berkshire Hathaway, and Tesla Motors. The Motley Fool owns shares of Amazon.com, Apple, Berkshire Hathaway, and Tesla Motors. 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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