Should You Buy When Warren Buffett Buys?

  • (0:45) - Should You Be Following Warren Buffett’s Trades?
  • (3:30) - Breaking Down Berkshire Hathaway's Portfolio
  • (9:50) - Well Established Cheap Companies
  • (16:30) - VZ, CVX, RH, MGY, MLHR, ABBV, STNE

Welcome to Episode #234 of the Value Investor Podcast. Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

The Berkshire Annual Meeting for 2021 will take place on May 1 in Los Angeles.

It will feature two 90-something men: Warren Buffett and Charlie Munger. Thousands will watch “live” as the event will be streamed on YahooFinance.

There are many value investors who live and breathe every Warren Buffett interview and stock maneuver he makes in the Berkshire Hathaway portfolio.

But should you buy what Buffett buys?

The “Problem” Berkshire Faces in 2021

Berkshire Hathaway is a mega-cap company with a market cap over $600 billion and billions of dollars in cash on hand.

Given its size, Buffett really has no choice when he deploys his cash: he must buy big.

That includes in acquisitions and in the stocks he buys.

For example, two of Berkshire Hathaway’s recent stock acquisitions, in the fourth quarter of 2020, were Verizon (VZ - Free Reportand Chevron (CVX - Free Report.

Verizon has a market cap of $233 billion and Chevron’s is $203 billion.

Buying shares in a small or mid-cap oil company such as Magnolia Oil & Gas (MGY - Free Report, which has a market cap of $2.8 billion, is just not going to be feasible for a company as large as Berkshire.

Limits on What Buffett Can Do

The sheer size of Berkshire has really put a limit on what Buffett could invest in over the last past 10 to 15 years.

He did manage to buy into some “smaller” companies like RH (RH - Free Report, which now has a market cap of $15 billion. It was smaller when he first bought in in 2019.

1 2
View single page >> |

[In full disclosure, Tracey owns shares of RH in her personal portfolio and shares of MLHR and MGY in Zacks Value Investor portfolio.]

Disclaimer: Tracey Ryniec is the Value Stock Strategist ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.