Warren Buffett buys General Electric

photo credit: trackrecordIf you follow the stock market or the national media, then you already heard the news that General Electric will be selling $3 Billion of preferred stock to Warren Buffett’s company Berkshire Hathaway. As a fellow GE stockholder, I am very pleased with this news. I realize that Mr. Buffett is getting a much better deal than the average stockholder could get. He is buying GE at a nice discount compared to the current share price along with a nice fat dividend. The deal also assumes the government bailout will go through. Anytime Warren Buffett makes a move, I think people should listen. After all, he didn’t become the world’s richest man by panicking. If he sees opportunity and value in General Electric in the current economic climate, I will be listening.

I wrote a post yesterday about the importance of raising cash in the current economy. By freeing up additional cash in the short term, it will put me in a position to purchase great companies at a huge discount while everyone else is panicking. The following quote below was mentioned by Warren Buffett yesterday when asked about his cash position and why he was buying shares of GE at this time.

…Yeah, we want to use cash. The reason we haven’t used our cash two years ago, we just didn’t find things that were that attractive. But when people talk about cash being king, it’s not king if it just sits there and never does anything. There are times when cash buys more than other times, and this is one of the other times when it buys a fair amount more, so we use it.
Quote taken from CNBC article - Charlie Rose Interview

photo credit: MatthewBradleyAs I write this post, shares of General Electric are way down in pre-market trading. This is a sign of panicking and is where Warren Buffett makes his money. I will not be purchasing any additional shares of GE at this time, as I already have a decent position in the company. But I will be looking for other attractive deals as Mr. Buffett has been doing recently with GE and GS. Warren Buffett is an investor that I admire greatly. When others panic, he steps in and buys high quality stocks. When times are good, he typically does the opposite and sells. Going against the grain is difficult to do, but a strategy that has made him lots of money.