• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

Why You Shouldn't Chase Buffett's New Stock Picks

Warren Buffett is rightly regarded as a genius investor, but traders shouldn't try to time his picks.
By KEVIN CURRAN May 03, 2019 | 04:09 PM EDT
Stocks quotes in this article: BRK.B, BRK.A, KHC, IBM, AAPL, ORCL, AMZN

Warren Buffett is one of the greatest investing minds of all time. But that doesn't mean you should blindly follow his lead.

The multitude of copycat investors trying to replicate Buffett and Berkshire Hathaway's (BRK.A) (BRK.B) portfolio is a well-known phenomenon, so much so that the company has tried to hide its holdings in petitions to the SEC.

"We recognize that there have been a number of occasions where disclosure of Berkshire's stock purchase or selling programs has resulted in temporary spikes in the market, and may to varying extents "foreclose [Berkshire's] ability to increase its holdings in that security at prices Mr. Buffett concludes are attractive," the commission acknowledged in 2003.

As an indicator in more recent memory, Berkshire Hathaway's latest stock selection of Amazon (AMZN) is sending shares of the e-commerce and cloud giant soaring on Friday, fomenting a 3% run to the upside.

Atypical for Buffett, and it was not Buffett himself who pulled the trigger on the investment to be fair, it would be difficult for disciples of Benjamin Graham to make a value argument. Likewise, there is no bad news creating an opportune buying time, something Buffett has been vocal in his fondness for.

However, Amazon is as close to a sure bet as there is in the market. As such, a long-term investor, and especially one with billions to spare, can wait as long-term share growth comes through even if there is volatility in the short term.

What investors need to consider is how long they can wait (it's likely not as long as Berkshire typically holds) and whether or not Buffett's disclosures make stocks unduly expensive.

Buffett's biggest holding at this point is Apple (AAPL) , a long-term bet that has paid off handsomely.

However, his investment blessing on Apple was certainly picked up on by short-term traders, as was evidenced in the price action and trading volume.

When his initial investment was announced on May 16, 2016, Apple trading volume spiked and within 10 days, the shares surged from around $90 per share to over $100. Two months from that point, trading volume normalized and the stock receded to the level Buffett bought in at.

While Apple has unquestionably been a good long-term investment, many trying to ride the wave of momentum built by Berkshire were likely left disappointed.

Oracle (ORCL) was a similar story when the Oracle of Omaha arrived in late 2018.

Upon the news that Buffett had bought over 40 million shares, the stock was lifted from around $49 per share to a high of $57.53 in the ensuing days. By year-end, the stock fell back to around $45 per share and it was announced in the following quarter that Berkshire had liquidated its position abruptly.

It is also worth noting that Buffett can be wrong, as he is human after all.

Investors chasing Kraft Heinz (KHC) or International Business Machines (IBM) after his big investments in each were left severely sore as earnings results came in. No one can be right 100% of the time.

Nonetheless, Buffett is right more often than he is wrong, which is why he gets the immense credit he deserves.

The issue investors should realize is that the stock pops his disclosures generate may make investments unattractive in the short term.

"As a rule, I do not chase stocks," Real Money's Stephen "Sarge" Guilfoyle recently told investors.

Counter-intuitively, Warren Buffett's bets may be a great data point to prove the rule.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from trading individual securities.

TAGS: Investing | Investing basics | Stocks | Technology | Conglomerates | E-Commerce | Analyst Actions | Stock of the Day | Warren Buffett | Earnings Preview

More from Stocks

As Fed Hour Approaches, Bulls Are Believers, Bears Are ... Incredulous

James "Rev Shark" DePorre
Feb 1, 2023 11:58 AM EST

One side has hope the Fed can tame inflation and set up a soft economic landing while the other thinks that expectation is ridiculous. Soon, we'll have some clues about what could play out.

McDonald's Solid Quarter Hijacked by Trouble on the Horizon

Jonathan Heller
Feb 1, 2023 11:30 AM EST

When the largest restaurant chain -- and 'Big Five' name -- talks you take notice.

What Do C.H. Robinson's Charts Say About the Economy?

Bruce Kamich
Feb 1, 2023 10:48 AM EST

The freight transportation firm reports Q4 earnings after Wednesday's market close.

I Like AMD and Lisa Su Even If the Stock May Need a Trim

Stephen Guilfoyle
Feb 1, 2023 10:45 AM EST

Do not confuse prudent risk management with my not continuing to like this name.

Look for More Upside in These 2 Stocks, Even Against a Challenging Backdrop

Bret Jensen
Feb 1, 2023 10:30 AM EST

Both names should see growth in 2023 and they're reasonably valued.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:27 PM EST REAL MONEY

    LIVE EVENT: Chris Versace and "Sarge" Guilfoyle Share Their Stock Market Insights

    This Monday, Jan. 30, at 12 p.m., our very own exp...
  • 11:48 AM EST REAL MONEY

    Watch Doug Kass on the Daily Rundown!

    In today's Action Alerts PLUS Daily Rundown, Doug ...
  • 11:03 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend On Real Money

    It's time to start using this power to build great...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login