Warren Buffett is one of the most successful investors of our time. As a result, investors like to watch what he is doing with his money in order to get ideas. Often times when his Berkshire Hathaway (NYSE:BRK.A) reports its updated holdings we can see some meaningful swings in the stocks he is buying and selling.
However, before I list Mr. Buffett’s most recent portfolio changes, I want to warn investors that blindly following Warren Buffet into his investments is a bad idea. There are three reasons for this.
The first is that While Mr. Buffett is talented, he is not infallible. He has made several lousy bets over the years along with his excellent bets, and so you still need to do your own due diligence when picking stocks. Warren Buffett’s picks give you a place to start, but that’s all.
Second, while Mr. Buffett stresses that you should have a full understanding of the businesses that you invest in, keep in mind that many of the businesses he invests in are fairly complicated. Whether he is neglecting his own advice is debatable, but I would avoid stocks in, for example, financial and insurance institutions given their opaque derivative holdings.
Third, as a small investor you have a lot of options available to you that Mr. Buffett does not. With a $312 billion market capitalization, Berkshire Hathaway pretty much has to buy mid-cap and large-cap companies in order to move the needle. It isn’t worth his time to buy a $300 million market cap company even if it is worth $500 million. But as a retail investor you can take advantage of such a situation. Keep in mind that smaller, esoteric companies are more likely to be mispriced because fewer investors have discovered them, and so there are a lot of advantages in looking for opportunities here. Keep in mind that Mr. Buffett started out by finding mispriced companies that were under the radar.