5 Buffett Investments That Surprised Even His Followers

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He is widely known as the “Oracle of Omaha” for his style of investing: value investing.

Buffett’s investment style and choices have become investment mantras for millions of investors. And for good reason, its capital has increased by more than 20% for more than five decades.

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

#1 Amazon

Berkshire Hathaway, Warren Buffett’s investment firm, first bought $1 billion worth of Amazon stock in 2019.

This investment came long after the e-commerce giant had become a household name. Since its IPO in 1997, the stock has multiplied, multiplying by one hundred. So when Buffett invested in the stock, in 2019, it was already trading at US$1,800.

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

However, the Oracle changed its mind and said that Amazon was a big company and was “an idiot” for not buying Amazon stock in the past.

Although the investment was made by Berkshire’s two investment managers, Todd Combs and Ted Weschler, it’s more than likely that such a high-profile investment would have received Buffett’s approval.

The investment was made at a price of US$1,800, following Buffett’s rule of thumb: “It’s much better to buy a great business at a fair price than a fair business at an exceptional price.”

Buffett said over the years his investment philosophy has changed from “buying fair companies at fair prices” to “buying quality companies at fair prices.”

Shares in the company now trade at $2,600, up 44% since 2019. Berkshire owns a total of 10.7 million shares of Amazon, or about 0.6% of its total portfolio.

#2 Apple

Berkshire Hathaway invested in technology company Apple in 2016.

When this became public, it surprised investors.

You see, Buffett has been against tech stocks for the longest time. He firmly believed that they were vulnerable to breakdowns and frequent technological changes.

Moreover, he is known to avoid investing in sectors or companies outside his circle of competence.

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

Apple has a considerable position in Berkshire’s portfolio, accounting for 40% of the total portfolio value.

Buffett now considers Apple a third company, calling it “probably the best company I know of in the world.”

#3 Nubank

The next investment that took investors by surprise was Brazilian fintech company NuBank – the world’s largest digital banking platform that runs a cryptocurrency trading platform.

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

What sent shockwaves was that Buffett and his partner Charlie Munger have always invested cautiously in IPOs and lobbied against them.

Moreover, they have always openly criticized cryptocurrencies, calling them “rat poison” and “disgusting and contrary to the interests of civilization”.

So when the NuBank investment came on the scene, it bucked two of Buffett and Munger’s historical trends.

NuBank completed its initial public offering in December 2021. Besides participating in the IPO, Buffett also invested in the company through a private fundraising in June 2021.

According to the June 2022 filing, Berkshire Hathaway has invested a total of US$500 million in Nubank, representing a meager 0.1% of its total portfolio.

#4 Western Oil

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

Investors have been surprised as the whole world switches to renewable energy, but Buffett is investing heavily in traditional oil companies.

The driving force was Buffett’s firm belief that the global transition to renewable, cleaner fuel sources will be slow.

The global energy crisis and the Russian-Ukrainian conflict have driven crude oil prices to 13-year highs.

This development in the energy market prompted Buffett to increase his stake in these traditional oil companies. The conglomerate has already drastically increased its stake in Occidental this year and aims to acquire 50% of the company.

According to Berkshire’s June 2022 filing, Occidental Petrol represents 4% of the total portfolio, or US$14 billion.

#5 TECO

Tesco is a major UK supermarket chain that Berkshire Hathaway first invested in in 2006.

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

But in 2014, when TESCO’s accounting scandal for overstating its profits came to light, Berkshire was still the third-largest shareholder.

The company recorded a loss of $444 million, one of the largest in its history. Buffett spoke about the mistake, admitting to his investors: “A careful investor, I am embarrassed to point out, would have sold Tesco shares sooner. I made a big mistake with this investment by hanging around.”

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

To conclude:

Hard to beat the strategy of super investor Warren Buffett. To imitate him is easy.

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

Think like a business owner and look for businesses with an economic advantage or gap. But no matter how good a company or its prospects, it all comes down to who’s running the show and how much you’re willing to pay for it.

But some of his surprising investments teach us that change is inevitable. And accepting that is the most sensible choice we have to make.

Be careful. Be smart.

Good investment!

Disclaimer: This article is provided 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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