Filed under: Investing
By Morgan Housel
The Motley Fool
In the investing world, knowing what not to buy may be equally as important as knowing what to buy.
After around 70 years of investing, Warren Buffett has undoubtedly emerged as one of the great investors all of time, but also one of the pickiest. Unlike some money managers that jump in and out of investments at breakneck speeds, Buffett's portfolio at Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) continues to exemplify the notion of buy and hold... forever.
Most Buffett fans, us here at the Fool included, love to play the game of trying to predict Buffett's next target for a big acquisition or investment. However, if we look at some companies that the Oracle of Omaha wouldn't touch with a ten-foot pole, there may be some lessons learned.
1. Apple (NASDAQ: AAPL ) If Buffett were to invest in Apple, such an investment would likely shatter the record for most tweets per second on Twitter and cause a CNBC commentator to simply explode. But rest assured, I do not believe Warren Buffett will make an investment in Apple. Despite the company's enormous pile of cash and track record of generating fat margins, Buffett views companies with a time horizon that can span well beyond 20 years. Although the iPhone-maker commands the best margins in the industry today, Buffett realizes the likelihood that the technology hardware landscape will change over the next several years is huge compared to a shift in the landscape of say, banking.
2. Netflix (NASDAQ: NFLX ) One of the things Warren Buffett looks for in a company is a strong and visionary leader. And Netflix has that in CEO Reed Hastings. However, Buffett also values a company with a significant "competitive moat" and that spits off tons of cash. Netflix does not have that. Despite being the first mover in the space, and its recent effort to create original content, prices for outside content will continue to rise as more companies enter the streaming space. Although Netflix stopped reporting its "churn" rate, most estimate that this rate is fairly low -- as competition emerges, there's not much that will keep customers from fleeing to a different service.