Warren Buffett has made a career of buying at the most opportunistic times. To Buffett, some of the best times to invest come when everyone else is shunning stocks. In 2011, it was no different. When one takes a closer look at the 13F filing made by Buffett's company, Berkshire Hathaway, the proof is in the pudding: Berkshire bought more stock in the third quarter of 2011 than it has in quite some time. (For more on Buffett's previous stock purchases check out Warren Buffett's Best Buys.)
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Turmoil Provides Opportunity
While the global economy continued to face uncertainty over the European debt crisis and slow economic growth here in the U.S., Buffett used the turmoil to his advantage. When markets sold off at the end of the third quarter and investors where rushing to sell, Buffett's conglomerate, Berkshire Hathaway (NYSE:BRK.B) (NYSE:BRK.A), was buying. With a long-term investment time frame, Buffett's investment decisions are mainly based on one factor - buy at a good price. Good prices tend to pop up when investors are panic stricken and start heading for the exits.
An Array of Businesses
Berkshire's purchases in the 2011 third quarter cover a broad array of businesses, most notably technology. Buffett's two new hires, Todd Combs and Ted Weschler, are certainly behind some of the various purchases. But the biggest purchase, over $10 billion in IBM (NYSE:IBM) was all Buffett's doing. The $10 billion investment is significant, even at Berkshire's size, and it makes IBM one of its largest equity holdings.
Visa (NYSE:V) was also a new purchase, and follows a previously disclosed stake in rival MasterCard (NYSE:MA). Visa and MasterCard have very appealing characteristics for Berkshire. They operate as a virtual duopoly in processing credit card transactions and both represent stable growing business models. To Buffett, value doesn't have to come in the form of low P/E stocks but rather great businesses that can be bought at a good price. Another interesting buy, Intel (Nasdaq:INTC) is an easy target for value seeking investors. Shares trade for about 10 times earnings and yield over 3.5%, a yield which is protected by ample free cash flow generation.
While most of Berkshire's new positions are currently trading at prices above what Buffett and his team paid for them, Berkshire invests for the long-term and expects significant upside over that period. Investors would be wells served to take an easier approach research the picks of the master. (For more on investing in the long term, read Long-Term Investing: Hot Or Not?)
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At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.