Berkshire Hathaway (BRK-B) invested in General Electric’s (GE) preferred shares at the height of the financial crisis in October 2008. Berkshire Hathaway exited its investment in General Electric last year. While the company managed to make some gains on the investment, it wasn’t exactly Warren Buffett’s most profitable investment. The returns look even more somber if we consider that the investment was made during the 2008 sell-off. The timing was ripe to pick quality stocks at an attractive valuation. Goldman Sachs (GS), which Buffett bought the same year, delivered much better returns.
A sinking ship?
Buffett is known for his witty quotes. One of his quotes that would fit the General Electric investment is “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” Looking at General Electric, the company faces several challenges. General Electric is restructuring its business. Looking at price action, General Electric lost 56% last year. The company saw a negative price action of 35% on July 1–December 31, 2017. Buffett sold-off General Electric before July 1, 2017.
In hindsight, Buffett’s decision to exit General Electric looks great considering the sharp fall in its stock price (SPY). Last year, there were some reports that Buffett might be considering buying General Electric shares. However, Buffett told CNBC that “he is not looking to buy all or part of General Electric.” He said, “That’s not the case. If that was the case, I wouldn’t be talking about it anyway”
General Electric has been in a freefall in the last few years. Will Buffett look at General Electric?