What car company did Warren Buffett recently boost his stake in by over 60%? Hint: It's not Tesla.
With its sleek design and technology straight out of science fiction, no car company has captured the imagination of investors quite like Tesla. And, Tesla has rewarded its buyer by quadrupling in price since the start of 2013.
So, what car company did Warren Buffett, the world’s most famous investor, recently boost his stake in by over 60%? It’s none other than 105 year-old General Motors.
According to recent filings with the SEC, Warren Buffett’s Berkshire Hathaway increased his position in GM from 25 million shares to 40 million in the second quarter of 2013. During the course of that time, shares rose over 22%. Buffett’s current stake is worth nearly $1.4 billion.
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Pundits like to say Tesla is a technology company that makes cars whereas GM is a health care company that makes cars. GM’s health care costs are believed to add more than $1,500 to the price of every vehicle it sells.
But, there’s one thing both car companies have relied on in the past: government help. While GM was famously bailed out half a decade ago by the federal government to the tune of $49.5 billion, then-startup Tesla borrowed $465 million from the US Department of Energy at around the same time. Buyers of Tesla cars receive $7,500 back in tax credits, as do GM’s Chevy Volt buyers. And, in the one quarter where Tesla showed a profit (Q1 2013 net income of $11.25 million), its gains came about only because it sold $68 million in clean-air credits to other manufacturers.
Both carmakers needed subsidies and credits to survive. And, to the day, the US taxpayers hold nearly 190 million shares of GM, nearly five times as much as Buffett’s current stake.
So, is investing with Buffett the better buy?
We ask Talking Numbers contributor Enis Taner, Global Macro Editor atRiskReversal.com, to look at the charts for GM. And, we ask Pat Dorsey, president of Sanibel Captiva Investment Advisers, to look at the fundamentals and decide if investing with Buffett on GM is the right bet.
To hear Taner and Dorsey analyze GM, watch the video above.