The Warren Buffett Effect: Minimal?


No investor in the history of the world has wielded more power and influence on Wall Street than Warren Buffett. But not many people are following his lead in buying more Goldman Sachs (NYSE: GS) shares today.

Berkshire Hathaway (NYSE: BRK-B), the Buffett-owned investment company, intends to take an ownership stake in Goldman Sachs. Berkshire Hathaway already owns a large block of Goldman Sachs warrants, and a new amendment will allow Berkshire to trade in its gains for additional shares of the investment bank’s stock.

Buffett and company bought Goldman Sachs at $115 a share, and with the stock currently hovering in the $146 range, have booked $1.3 billion in gains. Now Berkshire plans to parlay those gains into a 2% Goldman Sachs stake.

One might assume that Warren Buffett owning more shares in a company would persuade others to hop on board. At least for one day, that hasn’t been the case.

Goldman Sachs shares received a modest 0.3% boost today – below the S&P’s 0.7% uptick on Tuesday. Perhaps the recent run-up in the bank stock is hindering its growth. Goldman shares have risen 11% this year and 15% over the past three months.

Berkshire Hathaway’s stock, meanwhile, received a more substantial boost, with “B” shares advancing 1.4%.

Long term, Buffett’s increased stake in Goldman Sachs should only help its share price. For now, though, additional involvement by the world’s foremost investor isn’t having the immediate impact you might expect.

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