8 Stocks Warren Buffett Should

Never Buy

Apple (NASDAQ: AAPL)

Apple (NASDAQ: AAPL)

• While Apple has tons of cash and trades at a very attractive valuation, the ever-changing dynamics of the computing industry would likely scare Buffett away

• Will people still be using iPhones in 20 years? Maybe, but maybe not. The same goes for the rest of Apple’s products!

Tesla Motors (NASDAQ: TSLA)

Tesla Motors (NASDAQ: TSLA)

• Warren Buffett generally invests in companies that have a steady track record of profitability and trade for reasonably low valuations

• 2013 was Tesla’s first profitable year, and shares trade for 116 times this year’s projected earnings.

Amazon.com (NASDAQ: AMZN)

Amazon.com (NASDAQ: AMZN)

• Even though Amazon’s sales are nearly $75 billion per year, the company managed less than $300 million in earnings last year.

• Shares trade for more than 550 times TTM earnings, despite a very inconsistent history of profitability

Netflix (NASDAQ: NFLX)

Netflix (NASDAQ: NFLX)

• Netflix operates in a very competitive segment, and it remains to be seen whether the company’s business will be able to compete with other “streaming” services

• Netflix doesn’t have a clear competitive advantage, which is an absolute must for a Buffett investment

Annaly Capital Management (NASDAQ: NLY)

Annaly Capital Management (NYSE: NLY)

• Annaly and the other mortgage REITs are simply too highly levered for Buffett’s taste

• The high leverage leaves the companies very sensitive to interest rate fluctuations

• Buffett would be more likely to purchase shares of REITs that own actual properties

Facebook (NASDAQ: FB)

Facebook (NASDAQ: FB)

• Buffett and his right-hand man Charlie Munger have publicly stated they would never invest in Facebook, but wouldn’t bet against it either

• Munger has even gone so far as to say that he despises the very idea of Facebook, calling it “counterproductive”

Chipotle Mexican Grill (NYSE: CMG)

Chipotle Mexican Grill (NYSE: CMG)

• Although Chipotle has been the growth rockstar of the “fast-casual” dining sector, the stock still trades at a very high P/E ratio and is far too volatile for Buffett’s taste

• The restaurant business is just too difficult to sustain a high profit margin in after growth slows

Bitcoin

Bitcoin

• Even though it’s not a stock, Bitcoin definitely is one investment we’ll never see Warren Buffett make

• Buffett has called the Bitcoin infatuation a “mirage”, calling it no more revolutionary that writing a check or sending a money order

The Greatest Thing Warren Buffett Ever Said

Photo Credits

• Apple Ipad – Randolf Jorberg• Tesla Roadster – flickr/cytech• Amazon.com – flickr/torley• Chipotle – wikipedia/proshob• Bitcoin – pixabay/Dry2