Date
26 May 2017
Warren Buffett has tweaked his investment approach in keeping with the times, paving the way for some new high-profile stock bets. Photo: Reuters
Warren Buffett has tweaked his investment approach in keeping with the times, paving the way for some new high-profile stock bets. Photo: Reuters

How Buffett adopted the Scuttlebutt Method for new stock picks

Warren Buffett has always been good at finding investment opportunities from everyday life. This explains the tycoon’s investments in firms such as Coca-Cola, Heinz and Wells Fargo in the past.

That said, the legendary US billionaire seemed to have switched to a different approach in recent years.

Buffett revealed in an interview with CNBC Monday that although he doesn’t personally own an iPhone, he has more than doubled his holdings in Apple in January.

Berkshire Hathaway currently owns US$18.2 billion worth of Apple shares. That makes Apple the company’s second largest holdings after Coca-Cola.

Asked why he decided to place big bet on Apple, Buffett said: “Because I like it!”

“I don’t have an iPhone,” Buffett said. “I have an iPad. Somebody gave it to me though.”

“Apple strikes me as having quite a sticky product, and an enormously useful product to people who use it,” Buffett told CNBC.

The tycoon added that investment guru Philip Fisher’s 1958 book “Common Stocks and Uncommon Profits” inspired him to do some research as to how consumers feel about Apple products.

“He talks about something called the ‘scuttlebutt method’, which essentially means going out and finding out as much as you can about how people feel about the products that they use,” Buffett noted.

In his other heavy bets like IBM and airline stocks, Buffett has obviously used the same method, as we know that Buffett doesn’t use the cloud service of IBM, and that he flies with his private jet.

Berkshire’s IBM position is currently worth about US14.6 billion. Meanwhile, its stakes in American Airlines, United Continental Holdings, Delta Air Lines and Southwest Airlines are together worth almost US$10 billion.

The company’s 87-year-old chief had been known for a somewhat traditional lifestyle, which raised the risk that he could be getting distant from the average people and the young generation.

But Buffett has proved that he can, indeed, keep an open mind and change his investment approach when necessary.

Had the tycoon continued to insist on investing in companies that were relevant to his personal life, as he had always done in the past, he would have missed a number of fantastic opportunities.

This article appeared in the Hong Kong Economic Journal on March 1

Translation by Julie Zhu

[Chinese version 中文版]

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RC

Hong Kong Economic Journal columnist

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