Berkshire Hathaway bought largest stake in GM before slump

Article by Anita Panait, on July 7, 2012

Although Berkshire Hathaway Inc. acquired its largest stake in General Motors before the shares dropped 16 percent, the company doesn’t seem to be worried much. According to the National Association of Insurance Commissioners data compiled by Bloomberg, Berkshire bought around 8.47 million GM shares through Feb. 3, 2012, at an average price of $24.35.

Comparing that to GM’s closing share price of $20.54 on July 5, 2012 in New York Stock Exchange trading, it seems that Warren Buffet’s deputy stock pickers made the wrong move. If Berkshire sold the shares today, the conglomerate would stand to lose money. But, the conglomerate is optimistic.

According to Meyer Shields, an analyst at Stifel Nicolaus & Co., Berkshire does not focus on short-term gains as shown by its track record, allowing the company to endure more fluctuation than almost any other investment firms and eventually benefit from a profit.

Buffett, who is the third-richest person in the world, has a reputation of investing in stocks below inherent values and enduring market swings until prices rose. Using that strategy, Buffet helped Berkshire, in which he is the chairman, president and chief executive, acquire the largest holdings in different companies like Coca-Cola Co. and American Express Co.

Buffet is preparing for his exit from the conglomerate in part by employing Ted Weschler and Todd Combs to help oversee a portion of the company's $89.1 billion stock portfolio. During Berkshire’s annual meeting on May 5, 2012, Buffet divulged that he makes the decisions for the company’s larger wagers and leaves the smaller bets for back-up stock pickers, who oversee $2.75 billion each.

Topics: gm

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