Nick McDonald: How to invest a billion dollars?

Warren Buffett - he's got $50 billion to spend. Photo / AP

It is fair to say that there is quite a lot you could do with one billion dollars. You could for example buy the most expensive house in Auckland 25 times over. An art investor could have bought 'The Card Players' which is the most expensive painting ever sold and still have plenty of spare change for future investments. Football fans might decide to splash out and buy their favourite club with any one of Chelsea, Manchester City, AC Milan and Liverpool all leaving you change from a billion.

Now how about we crank this up a little bit to a fresh $50b in bills? This just so happens to be the amount that Warren Buffet has laying around looking for an investment home. This is a whole new ball game in the 'almost-impossible-to-spend' category.

With this kind of cash, a football fan can outright purchase the top 20 football clubs in the world - a list including Real Madrid, Barcelona, Manchester United, Bayern Munich and Arsenal - and still have well over half of their cash left.

You could take the most expensive building built to date, Marina Bay Sands in Singapore and build around another 8 of them. Looking locally, if you bought every single share in Spark (Telecom) outright at the market price you would only manage to spend 10 per cent of your cash pile. And that is to assume you could buy every share at today's price - very unlikely.

With $50b you could even run the entire London Olympics more than 3 times if it took your fancy!

So, what will the great man Warren Buffet himself spend his stock pile of cash on? If we knew that with any certainty then of course we would all be billionaires. We do know however that Buffet likes a good pull back in stocks markets as it gives him a chance to add to his biggest stock holdings at a cheaper price. We also know that stock markets have pulled back in recent weeks with many forecasting them to pull back further. Whether stocks pull back further again from here or not is nothing but star gazing. What we can say however is that many of Buffets top public stock holdings, are cheaper today than they were just a few weeks back.

Here are a few from Buffet's top 15 public shareholdings that have given up the most value since 1st July, the approximate date of the most recent high in US stocks:

Wells Fargo (WFC) - 5.2 per cent

Makes the list because it is Buffet's biggest single stock holding with around $20b already invested. WFC has given up just over 5 per cent since July and may be a cause for Buffet to consider buying more shares.

Buffet likes their independence in not following the "flock" when other banks do "dumb things". "Those guys [Wells Fargo] have gone their own way. That doesn't mean that everything they've done has been right. But they've never felt compelled to do anything because other banks were doing it".

Coca Cola (KO) - 6.7 per cent

Buffet is a big fan of the brand value of coke saying 'If you gave me $100 billion and said take away the soft drink leadership of Coca-Cola in the world, I'd give it back to you and say it can't be done". He puts his money where his mouth is too, Coke is his second biggest public investment. That investment has a market value of 6.7 per cent less than it did 6 weeks ago.

American Express (AXP) - 8.3 per cent

A big faller in terms of the recent pullback and Buffet's 3rd biggest holding so no doubt he has a close eye on the price point. However, unlike some of the other stocks in this list, Amex is up massively since dipping below $10 per share in 2009 and now trading at $87.47. That is a big move upwards so in spite of an 8.3 per cent fall, it might not be enough to get Buffet buying more.

US Bancorp (USB) - 5 per cent

Not a huge decline but makes the list for no reason other than this is one of my favourite Buffet stocks personally. I have had some great trades on this in the past and always watch it closely for future opportunities. I am doing exactly that again at these price levels.

General Motors (GM) - 10.8 per cent

The biggest loser in Buffet's top 15 portfolio is GM, down over 10 per cent since 1st July.

USG Corp (USG) - 8.3 per cent

While on par with Amex for falls since start of July, USG actually peaked much earlier and has fell harder recently than any other top 15 publicly listed shareholding of Warren Buffet. Since the end of Feb, USG is down over 25 per cent and is perhaps a prime candidate on that basis for another Buffet share purchase. Trading at $27.36 per share, it is well below the glory days of 2006 when it hit a high of $121.70.

Buffet will probably surprise us with his next move as he always has but the large publicly listed companies discussed here provide a way that we can indeed start to invest like Buffet.

It is not easy to invest $50 billion dollars. How would you go about it?

Nick McDonald is a New Zealander teaching everyday people how to trade the worlds markets via his company Trade With Precision.