Billionaire Warren Buffett Bought Only 1 New Stock in the Third Quarter -- and It Was the Cheapest of the "Magnificent Seven"

Warren Buffett's Berkshire Hathaway initiated a new position in Alphabet (GOOG/GOOGL) during the third quarter, acquiring over 17.8 million shares, which now constitutes 1.6% of its $267 billion portfolio and its 10th largest holding. This move is significant given Buffett's value-oriented investment strategy and historical selectivity with tech stocks, as Alphabet was identified as the cheapest among the "Magnificent Seven" at the time of purchase, trading at 23 times forward earnings. The investment signals a strong conviction in Alphabet's robust market position, particularly its internet search moat and growth potential in cloud computing and AI, suggesting a compelling value proposition even within the tech sector.

Analysis

Warren Buffett's Berkshire Hathaway initiated a significant new position in Alphabet (GOOG/GOOGL) during Q3, acquiring 17,846,142 shares. This investment now represents 1.6% of Berkshire's $267 billion portfolio, making it Buffett's 10th largest holding. This move is particularly notable given Buffett's historical selectivity with technology stocks and his value-oriented investment philosophy.

Alphabet was identified as the cheapest among the "Magnificent Seven" tech stocks at the time of purchase, trading at 23 times forward earnings estimates in Q3. This valuation aligns with Buffett's strategy of finding companies trading for less than their intrinsic worth. The decision underscores a conviction in Alphabet's robust market position, including its dominant internet search moat and growing strength in cloud computing.

The investment also reflects confidence in Alphabet's long-term growth story, particularly its potential in the artificial intelligence (AI) market. While Buffett often enters growth stories later, his past Apple investment (up ~900% since 2016) demonstrates the rewards of such a strategy. Currently, Alphabet remains attractively valued at 26 times forward earnings, making it the second-cheapest among its peers after Meta Platforms.

Key Decisions for Investors

• Investors should consider Alphabet (GOOG/GOOGL) for long-term portfolio allocation, given Warren Buffett's recent significant investment and its attractive valuation relative to its "Magnificent Seven" peers
• Monitor Alphabet's continued growth in cloud computing and AI, as these segments are key drivers for future earnings and market leadership
• Evaluate the stock's current forward P/E of 26x as a potential entry point, aligning with a value-oriented approach despite its tech sector classification