Ping buffetts investing
Warren Buffett does not deny the fact that he wants to keep confidential information as confidential for as long as it is legally allowed. Speaking to The Ledger in , Buffett said : How would you feel if you had to announce every story idea you had? There are only about three people I'd like to know what they are doing. But I don't feel entitled to know. In fact, I think it would be unfair. The below is an excerpt from the same newspaper article that appeared in The Ledger in He said that he did not believe that public investors should always be allowed to piggyback on investment ideas made by professional investors, especially before they are finished buying.
Empirical evidence suggests that Berkshire is most likely building a stake in a company that it sees as undervalued. More importantly, the company believes that disclosing the name of the company to the market will lead to a run on the company shares, suggesting it is in a deeply undervalued territory at the moment and is a highly liquid issue. Good things take time Warren Buffett, Charlie Munger, or their lieutenants are unlikely to be in a hurry to scoop up equity securities of a company they believe is undervalued.
If Berkshire decides to release the confidential information to the market in the fourth-quarter filings, I would be surprised, to say the least, but I would not be complaining. When Berkshire followed a similar reporting treatment for its IBM stake, the company happened to be accumulating IBM stock for nearly nine months before revealing the investment to the market in November of The preferential treatment granted for Berkshire by the SEC in the past has not been limited for just three or four months, and there's every reason to believe that Buffett and co.
It's time for an educated guess There's no way of knowing what Berkshire is up to, and I sincerely hope a major announcement is on the cards regarding a multi-billion-dollar investment. If I had to guess the business sector Berkshire's secret investment represents, I'd say it has to be either the tech sector or the energy sector. As illustrated below, the technology sector already accounts for nearly half of Berkshire's portfolio.
Source: GuruFocus What is even more interesting is the fact that the tech sector's weighting in Berkshire's portfolio has steadily increased over the last couple of years and is currently at a historical high. Source: GuruFocus Considering the increasing involvement of Greg Abel, Ajit Jain, Ted Weschler, and Todd Combs in the investment decision-making process of Berkshire, the high exposure to the tech sector does not come as a surprise.
The case for the energy sector is a complete contrast. Energy sector companies represent less than 0. Source: GuruFocus I'm not saying that Buffett and co. Rather, Berkshire has a knack for picking up companies at dirt-cheap prices when everything seems to be going against such companies. Berkshire has a history of investing in energy companies, and its recent actions suggest the conglomerate does not believe the end for the oil industry is anywhere near.
Considering the cheap valuation levels, the improving prospects, and the high dividend yields associated with many oil and gas companies, I would not be surprised if Berkshire's secret investment turns out to be a big oil company. Now, it's time to crunch some numbers to see whether we can identify some potential companies Berkshire might consider including in its portfolio.
In its F filing on Nov. The below is the complete list of companies that meet the market cap criteria. Source: Yahoo Finance Berkshire owns a few companies in this list already, and if the company is building an investment behind the eyes of the market, it's likely to be a new holding. Even though numbers suggest Berkshire's new investment will involve one of the companies in the above list, there are many ways how this theory could go wrong.
For instance, the SEC might have waived the D reporting requirement for a limited period of time, and the company might well be building a large stake in a company that is much smaller than the ones listed above. My guess is that the new name would turn out to be a major tech or energy company, and it might take many months before any information is released to the market.
Conspiracy theories have already begun to surface What makes investing in stocks interesting is the surprise element attached to this asset class. Saying I was surprised to find out that some investors believe Buffett might be building a large position in Tesla, Inc. That's not true in investments. You get paid just as well for the most simple dive, as long as you execute it all right. And there's no reason to try those three-and-a-halfs when you get paid just as well for just diving off the side of the pool and going in cleanly.
And it's very nice, because you get paid just as well for the 1-foot bars. You've had this incredible reduction in the short-term Treasury bill, and that is the yardstick against which other values are measured. You do not have the uniformity of top quality that you get with the American Olympic team in any sport. You do not get that in top management in American business. You get some very able people, some terrific people, like Bill Gates.
But you get a lot of mediocrity too. But there is that association over years. Coke wants to be where people are happy, and they want that in people's minds. That tends to be sporting events — it's the Disneylands of the world.

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