Warren Buffett Says Sell This Industry NOW!

| May 4, 2009 | 0 Comments

Let me ask you a quick question… When was the last time you watched the Sport of Kings?  When was the last time you went to watch the ponies run?

As you know, my girlfriend Linda’s a big horse lover.

She recently rescued a horse off the race track.  Slew A Soldier is a beautiful and sleek grey horse.  He loves to run, which probably comes from his pedigree.  He’s a descendant of Seattle Slew, one of the greatest racing horses of all time.

We love to watch the horses run.  It’s hard to beat the excitement of the race, especially the breathtaking finishes.  I’ve been known to duck out of the office early and head to the track with friends.  Beautiful weather, cold beer, hot dogs, and watching the ponies run.  It’s a great day.

Now, I’m far from a racing expert, but I’m learning.

This week I learned a big lesson.  Every horse has a chance to be a winner… even the long shots.

This weekend was the running of the Kentucky Derby… the biggest race in the world.  And this year the excitement of the race didn’t disappoint. A 50 to 1 underdog came around the final turn.  Mine That Bird (Yes, that’s the name of the horse) hit the final turn and flipped on the afterburners.  The rest of the field seemed to stand still as he sprinted up the rail.  He crossed the finish line so far ahead of everyone else, some observers wondered if he was the only horse running.

It was like watching an Olympic sprinter compete against a bunch of high school students.

The Derby wasn’t the only excitement this weekend.

This weekend was also the famed Woodstock for Capitalists.  It’s the annual meeting for Berkshire Hathaway.  The carnival-like business meeting attracts investors from all over the world.

Warren Buffett of course played the grand maestro.  He played in the bridge tournament with Bill Gates (you know him as the founder of Microsoft and one of the richest men in the world).  Buffett drank Coke by the case, and of course, hyped the products his companies make.

He was his usual jovial self.  He kept a smile even though he reported a fall in corporate earnings this year.

But, I doubt anyone cared.

Today, I don’t want to discuss new Buffet investments.  I don’t want to spit out facts and figures about the meeting.  I’m not even going to peer into Berkshire’s results or financial statements.

What I want to do is focus on one small comment.

It was buried in the busy day.  It didn’t attract a lot of attention.

I’d bet most of the Buffett faithful didn’t catch onto the significance of the comment.

But to me, it was one of the most important points that Buffett made. And I believe you should listen to Warren and take immediate action in your portfolio.

As you know, I’m a fan of Warren.  However, I don’t always agree with him.  This is one instance where our thinking aligns perfectly.  What am I talking about?

Warren’s comment about the newspapers.  He said, “For most newspapers in the United States, we would not buy them at any price.”

Think about that for a moment.  Buffett wouldn’t buy them at any price. Not for a million dollars, not for a dollar.  Buffet’s comment is profound. But I bet most people ignored his statement.

As a matter of fact, I know most people ignored it.  Two of the top three newspaper stocks are trading higher today.

Investors are always salivating like hungry dogs over every Buffett investment.  They ride his coat tails trying to profit from his investments. It’s not a bad idea, but too many focus on what to buy.  They ignore the more important aspect of what to sell.

You now possess the knowledge to save yourself serious money.  Buffett isn’t telling you to buy a stock… read between the lines.  He’s telling us to sell the newspapers.  Get them out of your portfolio.  Strip them from your investing universe.

The potential for losses is too great.

I know he’s right.  And I agree.  Let me tell you an anecdotal story.

A few weeks back, I went to brunch with a group of friends, and friends of friends.  I didn’t know many people at the table.  I quickly realized I was surrounded by friends working for one of the largest papers in the nation.

They were all in dire straits.  They were suffering from bone cutting layoffs, forced vacation, and unpaid furlough.  They talked openly about the destruction of their very business.  Every one of them, to a person, was looking for a new job.

Newspapers are struggling.  Circulation is down.  Advertisement revenue is down.  And the only thing increasing is the losses.

So, what should we do?  If you hold companies like the Washington Post (WPO), Gannett (GCI), or The New York Times (NYT), now’s the time to be selling… not buying.  Do it now, don’t wait.  Get these dogs out of your portfolio.  Focus on other areas that can make you money… don’t waste your time with a dead industry.  For once, Buffett and I agree on this one.

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Category: Stocks

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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