Afternoon all.
Just taking a look at some of the commentary from the $BRK.B annual meeting and thought I’d share a few thoughts as I go through some articles.
The main story for me is that Buffett has disposed of all his airline stocks. There was some knowledge that he’d reduced stakes in a couple of them but it was thought this was to comply with SEC regulations on ownership limitations.
When stocks started to drop through March there was actually talk that he might use this opportunity to pounce on one and take a controlling interest. The fact that he has gone in completely the other direction is a surprise to many I think. It could be quite ugly for airline stocks as there are definitely portfolio’s that attempt to mimic the Buffet holdings.
It also suggests that he does not believe in the idea of the v-shape recovery. You wouldn’t sell these beaten down stocks if you thought everything was going to open up soon and by Q4 the US economy would be back firing on all cylinders, as is the mantra from Trump and his administration.
What’s implied in this viewpoint was also echoed in another big story of the meeting in that despite having $137 billion in cash he said “We have not done anything, because we don’t see anything that attractive to do,”. He followed that up with “We are willing to do something very big,” he said. But at the moment, “we haven’t seen anything that attractive.”
If what we’ve just been through did not produce anything ‘that attractive’ I’m wondering what it would actually take for them to see value that is truly irresistible to them.
It’s quite funny that even when discussing potential buy backs of his own company stock he said “The price has not been at a level where it really feels way better to us than other things, including the option value of money, to step up in a big way,”.
In one respect this is totally understandable, there are companies in sectors that have been beaten down more then Berkshire, but I think it still hints that he feels the market is priced a premium despite the correction.
Despite his own reluctance to invest that $137 billion they have sat around, he message was still to bet on the USA and invest in the SP500 as a long term strategy.
To me it’s clear that Buffett is concerned about the next couple of years and sees some risk that the expected short-term recession could transform into a more serious structural decline in economic conditions. When you have $137 billion in cash you are not forced to sell assets to raise capital, so that fact that he decided to dump all those airline stocks at a loss speaks volumes.
Warren Buffett is certainly not correct 100% of the time though and it should not be seen as gospel, but he is not the only one with these concerns and he has a reputation and following that can certainly influence the behaviour of others moving forward from here.
I’ll leave it at that for now. Happy to chat in the comments [on eToro].
Stay safe, thanks for your time.
$SPx500 $DJ30 $NSDq100
