This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

You're Not Warren Buffett, So Don't Invest Like Him

NEW YORK ( TheStreet) --Warren Buffett continues to buy small-town newspapers. These moves might prompt investors to follow Berkshire Hathaway (BRK.B)into the trade. Don't do it.

I tire of hearing investors, from the retail to professional level, refer to themselves as "Warren Buffett disciples." You're as much a disciple of Warren Buffett as I am the literary offspring of William Gibson.

It's dangerous to mimic somebody like Buffett.

You likely do not have access to all of the components of a deal Buffett makes. Consider the newspaper acquisitions.

Buffett makes a reasonable argument: In these small towns, community life centers around newspapers. The newspaper remains the go-to and, quite often, the only choice for the news locals crave. That makes sense, but is incongruent with Buffett's ownership of the Buffalo News and recent purchase of his hometown paper, the Omaha World-Herald. These aren't necessarily small towns. Bottom line -- Buffett can afford to gamble on these properties. You and I likely cannot.

He can afford this, not simply because he's filthy rich, but because he can work deals to which the rest of us do not have access.

For example, when Buffett spent $142 million to buy local newspapers from Media General (MEG - Get Report), he got more than the newspapers. Buffett loaned Media General millions, at a 10.5% interest rate, and took a 20% ownership stake in the company via penny warrants. Simply put, he got a sweet deal.

In typical Buffett fashion, he wins even if he loses. Maybe his bet on small-town newspapers will end up flat or fizzle, but he still managed to effectively loan shark Media General. Here's a company bleeding cash and losing money (about $3.68 per share) looking to transform itself. It has about $12 million in cash and more than $658 million in debt. Buffett takes dying newspapers off of Media General's hands as it embarks on efforts to step into the digital century. Good luck.

Keep an eye on Lee Enterprises (LEE - Get Report), and not because you should buy the stock. It's in a situation that's pretty similar to Media General. It loses money, but has even more debt - close to $1 billion worth.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
MEG $16.42 -0.30%
LEE $3.29 -2.90%
AAPL $126.20 -0.32%
FB $87.08 0.20%
GOOG $522.83 0.19%

Markets

DOW 17,718.96 -38.95 -0.22%
S&P 500 2,073.06 -4.36 -0.21%
NASDAQ 4,999.0930 -14.03 -0.28%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs