Warren Buffett is stepping up to the plate again, buying $3 billion in 10% preferred stock from General Electric (GE), after adding $5 billion of Goldman Sachs (GS) preferred just days ago. Many are focusing on the confidence factor the Buffett moves suggest, which I agree with to a large extent. However, keep in mind that this second deal is just like the first in that he is not taking on any equity market risk by purchasing preferred stock. As long as these firms stay afloat, Buffett can’t lose a dime, regardless of where the common shares trade in the future.
Full Disclosure: Peridot was long shares of GE at the time of writing, but holdings can change at any time
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What if Buffett is early as his teacher Ben Graham was… It took Graham 10 years to get back to Break even… we have been discussing Buffetts purchases of GE and Goldman all last week on Myinvestorsplace.com… Is Buffett making the same mistakes as Graham???