5 Buffett investments that surprised even his followers

He is widely known as the ‘Oracle of Omaha’ for his style of investing. value investing,

Buffett’s investing style and choices have become a living mantra for millions of investors. And for good reason, his capital has grown by more than 20% in five decades.

But, over the years, Buffett has changed his investment strategies. And so, with that in mind, here are five stocks that surprised even his followers.

#1 Amazon

Warren Buffett’s investment firm Berkshire Hathaway bought Amazon shares worth US$1 billion for the first time in 2019.

The investment comes after the e-commerce giant became a household name. Since its IPO in 1997, the stock has grown manifold, rising a hundredfold. So, when Buffett invested in the stock in 2019, it was already trading at $1,800.

What was surprising was that Buffett never believed in either Amazon or Jeff Bezos for a long time.

However, Oracle changed its opinion, saying that Amazon is a great company and that it was ‘stupid’ for not buying Amazon shares in the past.

While the investment was made by two of Berkshire’s investment managers, Todd Combs and Ted Weschler, it is more than likely that such high-profile investments had Buffett’s approval.

The investment was made at US$1,800, according to Buffett’s golden rule, ‘It is better to buy a wonderful company at a fair price than a fair company at an amazing price’.

Buffett has said that over the years, his investment philosophy has gone from ‘buying fair companies at fair prices’ to ‘buying great companies at fair prices’.

The company’s shares are now trading at US$2,600, up 44% since 2019. Berkshire owns a total of 10.7 million shares of Amazon, which is about 0.6% of its total portfolio.

#2 Apple

Berkshire Hathaway invested in the technology company, Apple, in 2016.

When it went public, it stunned investors.

You see, Buffett has been against tech stocks for the longest time. He firmly believed that he was vulnerable to accidents and frequent technology changes.

In addition, he is known to avoid investing in sectors or companies that are outside the realm of his ability.

Berkshire began building a position at Apple in 2016 under the influence of two of its managers, Ted Weschler and Todd Combs. And now, Berkshire is its largest shareholder, holding a 5.44% stake in the tech giant.

Apple occupies a significant place in Berkshire’s portfolio, accounting for 40% of the total portfolio value.

Buffett, now thinking of Apple as the third business, calls it ‘probably the best business in the world I know of.’

#3 NuBank

The next investment that stunned investors was Brazilian fintech firm NuBank – the world’s largest digital banking platform that runs a cryptocurrency trading platform.

Berkshire Hathaway’s first investment in the company was during the IPO, where it made a good profit of US$150 million.

The shocking thing was that Buffett and his partner Charlie Munger have always been careful investing in ipo and lobbied against them.

Furthermore, he has always openly criticized cryptocurrencies, calling it “rat poison” and “disgusting and contrary to the interests of civilization”.

So, when investing in NuBank hit the headlines, it outperformed two of Buffett’s and Munger’s historical trends.

NuBank completed its initial public offering in December 2021. In addition to participating in the IPO, Buffett invested in the company through a private fundraising round in June 2021.

As of a June 2022 filing, Berkshire Hathaway has invested a total of US$500 million in NuBank, which is 0.1% of its total portfolio.

#4 Occidental Petroleum

Buffett invested in Houston-based oil company Occidental Petrol in 2019.

Investors were shocked as infections spread across the world Renewable energyBut Buffett is investing heavily in traditional oil companies.

The driving force was Buffett’s firm belief that the world’s transition towards renewable and clean fuel sources would be slow.

The global energy crisis and the Russia-Ukraine conflict pushed crude oil prices to a 13-year high.

This shift in the energy market has prompted Buffett to increase his stake in these traditional oil companies. The group has already significantly increased its Occidental stake this year and is aiming to acquire 50% of the company.

As of Berkshire’s June 2022 filing, Occidental Patrol accounts for 4% of the total portfolio, amounting to US$14bn.

#5 Tesco

Tesco is a large British supermarket chain in which Berkshire Hathaway first invested in 2006.

But in 2012, he increased his stake in Tesco to more than 5%, making Buffett one of the largest shareholders. Now it was surprising as he increased his stake despite several profit warnings. However, in 2013, Berkshire sold some of its stake, albeit at a slow pace.

But in 2014, when the TESCO exaggeration scandal broke out, Berkshire was still the third largest shareholder.

The company reported a loss of US$444m, one of the largest losses in its history. Buffett spoke of this mistake, admitting to his investors, “An observant investor, I’m too ashamed to report, would have sold Tesco shares earlier. I made a huge mistake with this investment.”

What Buffett achieved from this costly mistake was to be more decisive in exiting this investment when he had lost faith in management and their practices.

To finish:

The strategy of super investor Warren Buffett is hard to beat. It is easy to emulate.

Buffett follows a simple recipe for investing success – do your research, buy when others are intimidated, and buy stocks that you understand.

Think like a business owner and look for companies with an edge or an economic gap. But no matter how good a business or its prospects are, it all depends on the person running the show and how much you are willing to pay for it.

But some of his surprising investments teach us that change is inevitable. And acknowledging that we must make the wisest choice.

stay safe. be smart.

Happy investment!

Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.

(This article is syndicated from) equitymaster.com)

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