It's Not So Easy to Know What Buffett Is Buying

When word gets out that Warren Buffett has bought a particular stock, its shares jump immediately. After all, if the Oracle of Omaha wants into a company, surely it has a bright future, right? Unfortunately, determining whether Buffett has actually bought a company is not so easy.

Sure, as described here, we can follow the mandatory Berkshire (BRK.A) filings which detail its ownership in various securities (and many copy-cat investors do so diligently), but Buffett is not the only portfolio manager at Berkshire. But don't take my word for it, as this statement comes from Buffett himself:

The media continue to report that "Buffett buys" this or that stock. Statements like these are almost always based on filings Berkshire makes with the SEC and are therefore wrong. As I’ve said before, the stories should say "Berkshire buys."...Even then, it is typically not I who make the buying decisions. Lou Simpson manages about $2½ billion of equities that are held by GEICO, and it is his transactions that Berkshire is usually reporting.

As an example, shares in CarMax (KMX) rose 7.5% on the day a filing from Berkshire indicated it had taken a position. Presumably investors assumed Buffett had seen something in the valuation that the market hadn't. However, Alex Taylor refutes the fact that KMX was a Buffett purchase in a well-written article here.

So even though you know how to access Berkshire's filings, you may not know the buyer behind the buys. Your best defense is to do your own homework and to know yourself what you're buying.

Comments

[RogerScott:]

Also, Berkshire sometimes asks SEC to defer the required notice of holdings and sometimes SEC consents. Therefore, watchers of SEC filings sometimes assume BRK has sold a holding when actually it is buying more.
A likely signal that Simpson is behind a holding is to look at which subisidiary owns the stock. Simpson manages the GEICO portfolio.
Sometimes BRK buys a stock because of opportunities caused by a pending spin off. Do your independent research.
Simpson in the past decade or so has been a better stock picker than Buffett, according to Buffett.

2008 Nov 27 02:13 PM

[Austin Ligon:]

This is really a dumb note on a dumb point, particularly the reference to Alex Taylor's article on "who bought CarMax", which was even dumber.... Berkshire ONLY OWNS 40 public stocks....regardless of which subsidiary/executive does the buy, do you honestly think that some reflect a Buffett view of the world and others are just randomly bought by some out of control minion ? Buffett is famous for developing people he trusts in key positions at BRK, but all of their investments reflect his philosophy and input. And obviously he does everything he can to hide his decisions from the rest of the world until he and his team have executed their strategy. His net worth and his reputation rest on their joint decisions, and he takes investment decisions very seriously. This is best reflected in how few big investments BRK actually makes.

2008 Dec 01 12:03 PM