Buffett's 5 Investments that Surprised Even his Followers

Warren Buffett is one of the most respected and successful investors in history.

He is widely known as the 'Oracle of Omaha' for his style of investing - value investing.

Buffett's investing style and choices have become investing mantras for millions of investors to live by. And for good reason, his capital has compounded by more than 20% for over five decades.

But, over the years, Buffett has changed his investment strategies. And so, with that in mind, here are five stocks that surprised even his followers.

#1 Amazon

Berkshire Hathaway, Warren Buffett's investment firm, first bought US$ 1 bn worth of Amazon shares in 2019.

This investment came much after the e-commerce giant had become a household name. Since its IPO in 1997, the stock has multiplied, growing hundredfold. So, when Buffett invested in the stock, in 2019, it was already trading at US$ 1,800.

What was surprising was that Buffett never believed in Amazon or Jeff Bezos for a long time.

However, the Oracle changed his opinion and said Amazon is a great company and that he was 'an idiot' for not buying Amazon shares in the past.

While the investment was by Berkshire's two investment managers, Todd Combs and Ted Weschler, it's more than likely that such a high-profile investment had Buffett's approval.

The investment was made at a price of US$ 1,800, as per Buffett's golden rule, 'It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.'

Buffett has said over the years, his investing philosophy has gone from 'buying fair companies at great prices' to 'buying great companies at fair prices.'

The company's shares now trade at US$ 2,600, up by 44% since 2019. Berkshire owns a total of 10.7 m shares of Amazon, which is around 0.6% of its total portfolio.

#2 Apple

Berkshire Hathaway invested in technology company, Apple in 2016.

When this became public, it surprised investors.

You see, Buffett has been averse to tech stocks for the longest time. He firmly believed they are vulnerable to crashes and frequent technology changes.

Moreover, he is known to avoid investing in sectors or companies outside his circle of competence.

Berkshire began building a position in Apple in 2016 under the influence of its two managers, Ted Weschler and Todd Combs. And now, Berkshire is its largest shareholder, with a 5.44% stake in the tech giant.

Apple enjoys a considerable position in Berkshire's portfolio, accounting for 40% of the total portfolio value.

Buffett, now, thinks of Apple as a third business calling it 'probably the best business I know in the world.'

#3 Nubank

The next investment that surprised investors was the Brazilian fintech firm NuBank - the world's largest digital banking platform that runs a cryptocurrency trading platform.

Berkshire Hathaway's first tranche of investment in the company was during its IPO, where it made a handsome profit of US$ 150 m.

What sent shockwaves was that Buffett and his partner Charlie Munger have always been careful investing in IPOs and have lobbied against them.

Moreover, they have always openly criticised cryptocurrencies, calling it 'rat poison' and 'disgusting and contrary to the interests of civilisation'.

So, when the investment in NuBank came into the limelight, it bucked two of Buffett's and Munger's historical trends.

NuBank completed its initial public offering in December 2021. Apart from participating in the IPO, Buffett also invested in the company through a private fundraising round in June 2021.

According to the June 2022 filing, Berkshire Hathaway has invested a total of US$ 500 m in Nubank, which amounts to a meagre 0.1% of its total portfolio.

#4 Occidental Petroleum

Buffett invested in the Houston-based oil company Occidental Petrol in 2019.

Investors were surprised as the entire world is transitioning to renewable energy, but Buffett is heavily investing in traditional oil companies.

The driving force was Buffett's firm belief that the world's transition toward renewable and cleaner fuel sources will be slow.

The global energy crisis and the Russia-Ukraine conflict sent crude oil prices soaring to 13-year highs.

This shift in the energy market has pushed Buffett to increase his stake in these traditional oil companies. The conglomerate has already increased its Occidental stake drastically this year and aims to acquire 50% of the company.

As per Berkshire's June 2022 filing, Occidental Petrol is 4% of the total portfolio, amounting to US$ 14bn.

#5 TESCO

Tesco is a large British supermarket chain in which Berkshire Hathaway first invested, way back in 2006.

But in 2012, they raised their stake in Tesco to over 5%, making Buffett one of the largest shareholders. Now this was surprising because they increased their stake despite several profit warnings. However, in 2013, Berkshire did sell some of its stake, albeit at a slow pace.

But in 2014, when TESCO's accounting scandal for overstating its earnings came to light, Berkshire was still the third largest shareholder.

The company booked a loss of US$ 444 m, one of the biggest losses in its history. Buffett spoke of this mistake, admitting to his investors, "An attentive investor, I'm embarrassed to report, would have sold Tesco shares earlier. I made a big mistake with this investment by dawdling."

What Buffett drew from this expensive mistake was to be more decisive in getting out of this investment when he had lost faith in management and their practices.

To conclude

It's hard to beat the strategy of super investor Warren Buffett. Emulating it is easy.

Buffett follows a simple recipe for investing success - do your research, buy when others are fearful, and buy stocks you understand.

Think like a business owner and look for companies with an edge or economic moat. But no matter how good a business or its prospects are, it all boils down to the person running the show and how much you are willing to pay for it.

But some of his surprising investments teach us that change is inevitable. And accepting that is the most sensible choice we must make.

Be safe. Be smart.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.