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Buy like Buffett: Follow the supply chain

Warren Buffett, chairman of Berkshire Hathaway.
Lacy O'Toole | CNBC

Berkshire Hathaway, the conglomerate owned by Warren Buffett, announced plans on Monday to buy aircraft equipment make Precision Castparts in an all-cash deal valued at $37.2 billion.

Buffett told CNBC's "Squawk Box" Monday he decided to purchase Precision during the Allen & Co.media conference last month in Sun Valley, ID.

Read MoreWarren Buffett's $37 billion bet

"This is right up there at the top" of expensive deals, Buffett said. "This a very high multiple for us to pay."

Shares of Precision climbed more than 19.15 percent Monday.

Founded in 1949, Oregon-based Precision supplies equipment for the oil and gas industry and makes components for Airbus and Boeing.

Value manager Jamie Cox at Harris Financial owns the stock and remains bullish on the company. He told CNBC's "Power Lunch" the decision to buy the stock boiled down to one simple reason.

"Follow the supply chain," Cox said. "Think about the number of airplanes sold around the globe, Castparts is absolutely the place to be if you are thinking airplanes will be sold around the globe. You see enormous amounts of planes bought, this is where you want to be if you believe that story."

A buy for Buffett