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Warren Buffett is Dumping This Stock

Written By Brian Hicks

Posted July 27, 2009

An old friend of mine and I once developed an insanely simple, but highly effective trading technique back in 2001. We called in the Billionaire Boys Club.

This ‘smart money investing’ system was simple enough… buy and hold the same stocks that the billionaires were buying in the open market. It worked brilliantly.

We followed Sumner Redstone religiously in 2002 and 2003, as he bought millions of shares of Midway Games and WMS Industries in the open market. And it turned out to be one of the best trades we made all year. Midway games (MWY) quadrupled in price in 2003, flying from $3 to more than $12.

WMS Industries (WMS) went from $12 to $21 inside of six months.

And we did it again in 2008 with T. Boone Pickens.

Trading alongside billionaires – the ultimate in “Smart Money Investing” – is easy.

“You have a chance to following one billionaire who has snapped up millions of shares in a small energy stock. He’s acquired a 3 million share stake in a natural gas company that currently trades a market value of about $600 million,” we said on February 13, 2008.

That company was Interoil (IOC:AMEX).

And we were spot on…

After holding IOC for only two months, the underlying stock was up $7.23 from our entry price, and our June 2008 20 call options were up 91%.

It made sense not to bet against Pickens. He’s not one to throw around investment dollars at just any company. A man of his intelligence and stature is sure to have done plenty of research, and is sure to be well in the know before investing in any company.

Nowadays, we’ve been watching Buffett… and may soon follow him.

Warren Buffett’s Berkshire Hathaway is selling shares of Moody’s (MCO:NYSE), which brings the stake to 16.98% from 20.2%. And to be honest, given the shenanigans of Moody’s and similar companies, this move should have come a long time ago.





Here are the listed sales in the offering:

7/20/09… 1,817,000 at $28.7269 average in open market sale.
7/21/09… 3,915,100 at $26.9188 average in open market sale.
7/22/09… 2,254,200 at $26.6425 average in open market sale.

Look to short MCO shortly. We’re waiting for MCO to break below recent support levels of between 24 and 26.

We also have Goldman Sachs (GS) on radar… as Buffett holds a big bullish bet.




Reportedly, Buffett has no plans to exercise Berkshire Hathaway’s warrants to buy $5 billion of GS, although he could make quite a tidy profit. The warrants allow them to buy GS common shares at $115 each at any time until October 31, 2013. And with Goldman trading well above $160 at the moment, those warrants are worth well over $2 billion.

Buffett is sitting tight, though… and we may follow him in with call options in Options Trading Pit.