Warren Buffett's Latest Bet on America Is GM

DETROIT (TheStreet) -- Warren Buffett, famous for his bets on the U.S. economy and eternal optimism about this country's future, has become a buyer of one of the nation's biggest market symbols, auto maker GM (GM).

Buffett's Berkshire Hathaway (BRK.B) disclosed in its quarterly portfolio holdings filing with the Securities and Exchange Commission on Tuesday afternoon that it bought 10 million shares of GM during the quarter, the first time Buffett's company has bought into the automaker since it emerged from bankruptcy in 2009. Berkshire's stake, which was small enough to have been a portfolio selection made by one of Buffett's two recent hedge fund manager hires -- Todd Combs and Ted Weschler -- was valued at $256.5 million as of March 31, but was worth $214 million at Tuesday's close.

GM comprised a small fraction of the firm's $75 billion in holdings at the end of the first quarter, but it does represent Buffett's only play on the U.S. auto industry. Berkshire's only other U.S. transportation stock holding is UPS (UPS): the firm owns 1.4 million shares valued at $115 million.

Buffett has had for several years a large stake in Chinese automaker BYD, known primarily for its electric car lineup. That big auto bet, originally recommended by Buffett right hand man and Berkshire chief operating officer Charlie Munger, recently turned somewhat sour, as BYD's profit declined precipitously in 2011 and early this year.

GM has the biggest market share in the world's two biggest auto markets, China and the U.S. So far this year, GM stock is up 2%, while Ford (F) stock is down 7%. While U.S. auto sales have been rising for three years, after hitting a 27-year low in 2009, sales are slumping badly in Europe and growth in China has slowed.

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In the first quarter, GM beat estimates, earning $1.6 billion or 93 cents a share excluding items, while analysts surveyed by Thomson Reuters had estimated 85 cents. Nevertheless, S&P Capital IQ analyst Efraim Levy downgraded his rating from strong buy to buy and reduced his full-year estimate to $3.94 from $4.29. "We find GM's valuation attractive, but near-term challenges limit our enthusiasm," Levy wrote.

Buffett is closely associated with the Obama administration's economic policies. Obama agreed to lend bankrupt GM money so that it could emerge as a lower-cost, better run company at a time when global auto sales were about to begin a rebound. The auto bailout has become fodder for a campaign trail war of words between the White House and Mitt Romney, and a focus for Obama re-election campaign early advertising.

Buffett's company also revealed a new stake in Viacom (VIA) in the first quarter.

-- Written by Ted Reed in Charlotte, N.C.

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