How to buy stocks that Warren Buffett buys, but at a Discount!

Reading time: 3-5 minutes (808 words)

So you probably have heard about Berkshire Hataway. The company that Warren Buffett and Charlie Munger build. Their vision for Berkshire is to:

Warren Buffett is well known in the investment world and together with Charlie they are considered the most successful investors of all time. So they might know a thing or two about buying stocks or even entire companies.

Buying stocks that Berkshire buys at a discount

It’s publicly known which stocks Berkshire holds using a so-called 13F filing. This gives you insight into which stocks Berkshire buys and sells. We provide this overview for Berkshire.

At the top of this page you’ll see all holdings of Berkshire:

Below the holdings you can see all trades Berkshire made in the last quarters:

Buys (new stocks that Berkshire acquired);
Adds (extra added shares to their holdings);
Reduces (deducted shares from their holdings).

In this overview you can find:

The amount of shares that are acquired or reduced;
The percentage of the total amount Berkshire already owns;
The average total amount of cost;
The price range for the period when Berkshire bought or sold the shares (because it’s a quarterly report, the price range is the highest and lowest price point from that period);
The current price of the stock;
The percentage of the current price versus the lowest price range of the reported date period;

When you take a detailed look at the adds you can see some interesting things:

In the last three quarters of 2022, Berkshire increased their holdings in Paramount Global. But when you have a look at the price Berkshire bought these shares in the first two quarters, you can see they paid a significantly higher amount per share versus the current share price.

Price range 2022-06-30: $24-$39
Price range 2022-09-30: $19-$27
Price range 2022-12-31: $15-21

This tells you that Berkshire at the very least paid $24 per share in the quarter before 2022-06-30. It also tells you they even bought more shares for at least $19 in the next quarter.

When looking at the current price of $16.8, that means you get a discount of 30% and 11.8% compared to the price Berkshire paid. In other words, you can buy this stock much cheaper than Warren Buffett did!

How to use this strategy

First, this is not investing advice. Don’t blindly buy stocks because of the above reasons. In this case, I’ll give you a few things you should look for. As you noticed the Paramount share price dropped significantly (over 25%) last month. So before you buy anything, you need to know why the price dropped significantly.

Fig 1. The daily chart of Paramount Gobal ranging from Jan 2023 - 01-09-2023 (source Tradingview).

On the fourth of May, Paramount Global took a big hit. Dropping from $23 to $16 in a single day. That's more than 25%. We have to find out why this happened. A quick Google search provides more insights. In a recent earnings call, the CEO mentioned a few things:

Paramount is investing heavily in streaming services and reported more losses versus previous periods;
Paramount slashed dividends to shareholders from $0.25 to $0.05;
Meanwhile, there is a writer's strike in Hollywood so getting new movies and series out might become a problem if this isn’t resolved this year.

Investors were not happy with this news and went into a selling frenzy. But there is also good news, Paramount acquired 4+ million more subscribers to their streaming services. And in the earnings call the CEO said that 2023 will be the biggest investment year for streaming yet.

What to do?

You now know a few things:

Warren Buffett was willing to pay at least $24 a share;
Berkshire bought more shares each quarter in 2022;
Berkshire never buys companies to sell them a few months later, meaning they had a good reason to step in;
You can buy the same share for currently $15-$16 (depending on when you read this article);
You know that Paramount took a hit recently, reduced dividend payouts, having more costs due to their streaming services, and dealing with a writer's strike in Hollywood.

In order to take a better decision you can take a look at more metrics from Paramount. You need to decide if this is the right time to acquire shares of Paramount Global. And this always involves some predictions of the future:

Do you think the writers' strike will be resolved in 2023?
Do you think Paramount will grow its streaming subscribers in 2023?
Do you think Paramount is able to keep up with other streaming behemoths like Disney and Netflix?

Let me know what you think in the comments.

I also created a Youtube video about this subject: