It’s official: Warren Buffett is making a move Down Under.
The ‘Sage of Omaha’ has already taken a 3.7% stake in one of our biggest insurers, Insurance Australia Group Ltd (ASX: IAG).
That part we know for sure.
However, it’s what happens next which should interest local investors…
“Warren Buffett plans $2 billion a year Australian spending spree”
– Fairfax Media.
According to an article published in Fairfax Media in June, a recent telephone interview between Buffett and the media outlet revealed that more Aussie stocks could be caught in the crosshairs of the world’s greatest investor.
Banks, insurers and consumer goods are Buffett’s favourites.
Resources companies are not.
This is evident from some the key holdings in his $470 billion investment vehicle, Berkshire Hathaway.
It owns major stakes in companies such as Kraft Heinz, The Coca-Cola Company, Wells Fargo, Bank of America, MasterCard, GEICO, Goldman Sachs, Johnson & Johnson and much, much more.
“If you come back in two or three years, you will find we have got four or five Australian equities.”
— Buffett, quoted as saying in The Sydney Morning Herald.
Here’s why you should listen to what he says
As noted above, Warren Buffett – along with Vice Chairman Charlie Munger – controls the investments of Berkshire Hathaway.
Berkshire isn’t your everyday multinational conglomerate holding company.
According to the company’s 2014 annual report, Berkshire’s market value gained 1,826,163% between 1964 and 2014.
Buffett noted that over those five decades, $19 in book value had become $146,186 – equivalent to a return of 19.4% per year.
That’s an incredible return by anyone’s standard, so it’s little wonder the folks at IAG were willing to give up 20% of their insurance premiums for the chance to partner with the legend himself.
Will he buy one of Australia’s big banks?
Buffett has already shown he’s quite confident in holding American banks in the Berkshire portfolio.
However, speaking from his hometown of Omaha, he confirmed there was a strong possibility he could hold shares in one or more of Australia’s banks.
“In looking at banks, I would say there is a good chance that five years from now, we will have bought one or more positions in Australian banks,” he said.
Despite his candour, however, many analysts and market commentators are sceptical Buffett will take a position in any of the big banks – including Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) or Australia and New Zealand Banking Group (ASX: ANZ) – anytime soon given how expensive the sector currently appears.
But with money from his IAG deal set to start rolling in, the question on everyone’s lips is:
Which Australian stock will Buffett buy next?
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Motley Fool contributor Owen Raskiewicz has no position in any stocks mentioned.
The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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