Buffett dumps GE, keeps the big banks. Take note.

By Alec Hogg

When it comes to investments, Warren Buffett reckons “you want to be greedy when others are fearful. You want to be fearful when others are greedy. It’s that simple…” Just released US stock exchange filings for the June quarter show his Berkshire Hathaway has cashed out its holding in US industrial giant General Electric.

Buffett acquired the shares as part of an agreement to lend $3bn to a cash strapped GE in October 2008 when panic reigned and liquidity dried up during the Global Financial Crisis. That decision delivered a profit of over $1bn for Berkshire, but is worrying other investors in the stock. It co-incided with GE’s decision to replace long-time CEO Jeff Immelt after a 20% share price slide so far this year. Buffett hasn’t commented on the sale.

The Oracle of Omaha has shown a penchant for some big decisions lately, having dumped his Wal-Mart shares last year (then effusively praising rival Amazon) and more recently slicing a big stake in IBM (while piling into Apple Inc).

Buffett was one of the few to keep his head during the worst of the GFC, also providing loans on attractive terms to Goldman Sachs and Bank of America. Unlike with GE, he has retained these stakes. Which has encouraged those who regard low prices of big banks as a great buying opportunity. Take note.

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