Warren Buffett dispels a myth about Warren Buffett

Warren Buffett’s Berkshire Hathaway filled up on stocks as stock prices fell earlier this year.

On Saturday, Buffett revealed that the company bought shares for $ 51.1 billion during the first quarter. In a slide presented at Berkshire Hathaway’s annual shareholders’ meeting on Saturday, he noted that the acquisition covered a stretch between February 21 and March 15, with the company plowing $ 41.0 billion into the market. Berkshire spent as much as $ 4.6 billion on March 4 alone.

“We spent $ 40 billion in three weeks,” Buffett said. “Now we are a little back in our more sluggish mood.”

In the first quarter, the S&P 500 fell as much as 13.7%, reaching a low of 4,114 on February 24, before recovering slightly to end the quarter with a fall of 4.9%.

Berkshire’s trading activity seems to repeat one of Buffett’s most famous quotes: “Be afraid when others are greedy, and be greedy when others are afraid.”

But do not assume that this purchase is Buffett signaling to the world that he believes the stock market has bottomed out.

Warren Buffett (L) and Charlie Munger (H) at Berkshire Hathaway's shareholders' meeting in Omaha, Nebraska on April 30, 2022. (Source: Getty)

Warren Buffett (L) and Charlie Munger (H) at Berkshire Hathaway’s shareholders’ meeting in Omaha, Nebraska on April 30, 2022. (Source: Getty)

‘We have not been good at timing’

Buffett’s reputation as a value-oriented investor with a track record of market-beating returns may lead some to believe that “Oracle of Omaha” is a successful market timer (i.e., a person who makes trades based on the belief that prices have peaked or hit the bottom).

In fact, one of his most prominent calls came to buy stocks during some of the darkest hours of the financial crisis.

However, he made it clear on Saturday that he is no market hours.

“We do not have the faintest idea what the stock market will do when it opens on Monday – we never have,” Buffett said.

Reflecting back on the financial crisis, he noted that Berkshire “spent about $ 15 or $ 16 billion” buying shares around the time Lehman Brothers had failed in the fall of 2008. This proved to take months before the market would eventually reach a low point.

“It was a really stupid time [to buy stocks]and I wrote an article for the New York Times about ‘Buy American,’ “he said.

Following the publication of this article, the S&P 500 fell another 26% before reaching its bottom in March 2009.

“If I had any sense of timing and waited six months until …” he began to say. “The lowest was in March … I completely missed that opportunity.”

He kept getting clean.

“I totally missed, you know, March 2020,” he said of when the stock market started a new bull market after crashing during the onset of the pandemic. “We have not been good at timing.”

In fact, if Buffett and his team at Berkshire were convinced of their ability to predict market reversals, the company might not have needed to report $ 1.8 billion in unrealized losses on its securities portfolio during 1.2.

See you in 20 years

Buffett reiterated that his trades are based on the long-term prospects of the companies he buys, not his short-term expectations of the market or the economy.

“I don’t think we’ve ever made a decision where any of us have either said or thought, ‘We should buy or sell based on what the market wants to do,'” Buffett said.

These comments come as market volatility remains very high. On Friday, the S&P 500 fell 3.6 percent. For the month, S&P fell by 8.8%, the worst month since March 2020 and the worst April since 1970.

Fortunately for investors like Buffett, what happens in the weeks following a purchase will not make or break a trade.

“Over the next 20 years, I would expect [Berkshire’s stock portfolio] to have more capital gains than not, Buffett said.

It is worth noting that since 1926, there has never been a 20-year stretch where the stock market has not generated a positive return.

“I will report to you in 20 years whether it has happened or not.”

More from TKer:

Rear view πŸͺž

πŸ“‰ The shares are falling: The S&P 500 fell 3.3% last week. It is now only a 0.4% increase from the February 24 lowest level of 4,114, but a decrease of 14.2% from the January 4 high of 4,818.

S&P fell 8.8% in April, its worst month since March 2020 and the worst April since 1970. For more on market volatility, read this and this.

πŸ€‘ Earnings Bonanza: There were a host of companies reporting quarterly results and stocks moving. Apple shares fell after the company warned of billions of dollars in costs associated with supply chain problems. Amazon shares fell after the company reported its first quarterly loss since 2015. Microsoft shares rose after the company said its Azure cloud business was booming. Meta (aka Facebook) shares rose after the company said user growth returned. Alphabet shares fell after the company reported that revenue did not live up to expectations.

I’m not going to review all 160 of last week’s earnings announcements. But here’s a nice big summary of the earnings season so far from FactSet: “For Q1 2022 (with 55% of S&P 500 companies reporting actual results), 80% of S&P 500 companies have reported a positive EPS surprise and 72% of S&P 500 companies have reported a positive revenue surprise … For the first quarter of 2022, the growth rate for mixed earnings for the S&P 500 is 7.1% .If 7.1% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q4 2020 (3.8%). “

FactSet added that if you exclude Amazon’s weak quarter, S&P 500 earnings will be on track for growth of 10.1%.

(Source: FactSet)

(Source: FactSet)

πŸ‡ΊπŸ‡Έ Negative GDP in Q1 rejects economic strength: GDP fell by 1.4% in Q1. However, the negative pressure can be largely explained by the fact that the United States imported much more than it exported. Among other things, both consumer consumption and business investment grew, confirming the strength of the economy. For more on the GDP report, read this.

πŸ“ˆ Companies invest: According to Census Bureau data released on Tuesday, orders for non-defense capital goods excluding aircraft – also called core investments or business investments – rose 1.0% to a record high of $ 80.8 billion in March. This was significantly stronger than the 0.5% economists expected. Read more about business investments this.

πŸ’ͺ The strength of the labor market: In the week ending April 23, the first applications for unemployment benefits fell to only 180,000, the tenth week in a row this target was below 200,000. The insured unemployment rate (ie the number of people who made a first claim and then continued to claim benefits) was 1.4 million, the lowest level since February 1970. For more on the strength of the economy, read on this.

(Source: Ministry of Labor)

(Source: Ministry of Labor)

😀 Consumer confidence is ticking down: The Conference Council’s consumer confidence index fell to 107.3 in April from 107.6 in March. “The contemporary index fell, but remains quite high, suggesting that the economy continued to expand at the beginning of Q2,” said Lynn Franco of the Conference Board. “Expectations, although still weak, did not worsen further due to high prices, especially at the gas station and the war in Ukraine. The holiday intentions were cooled, but the intentions to buy large ticket items such as cars and many appliances increased somewhat.”

Keep in mind that weak consumer confidence does not necessarily mean that consumer consumption falls. For more on this, read on this and this.

🏘 House prices have risen: US house prices in February rose 19.8% year-on-year, according to the S&P CoreLogic Case-Shiller Index. This was the third highest reading in the history of the index. From S&P DJI’s Craig Lazzara: “The macroeconomic environment is evolving rapidly and may not support extraordinary house price growth much longer. The resumption of general economic activity after COVID-19 has boosted inflation and the Federal Reserve has begun to raise interest rates. in response. We may soon begin to see the impact of rising mortgage rates on house prices. “

πŸ’Έ Interest rates on mortgages are ticking lower, but still high: From Freddie Mac: β€œThe combination of rapid growth in house prices and the fastest rise in mortgage rates in over forty years is finally affecting purchasing demand. Homebuyers navigating the current environment manage in a variety of ways, including switching to adjustable-rate loans, moving away from expensive coastal towns, and searching for more affordable suburbs. We expect that the fall in demand will dampen house price growth to a more sustainable pace later in the year. ”

(Source: Freddie Mac)

(Source: Freddie Mac)

Up the road πŸ›£

All eyes will be on the Federal Reserve as its monetary policy committee meets on Tuesday and Wednesday. Economists expect the Fed to announce a 50 basis point increase to its key interest rate and stock plans to reduce the size of its balance sheet. These are actions that Fed officials have signaled in recent weeks amid high inflation. Last Friday, we learned that the Fed’s preferred inflation target – the core PCE price index – rose 5.2% in March from a year ago. This was just below the 5.3% drop in February, the highest since April 1983.

Friday comes with the US job report in April. Economists estimate that employers added 400,000 jobs during the month.

We are also still in the middle of the earnings season. Check out the calendar below from The Transcript with some of the big names announcing their quarterly financial results this week.

1. I wrote a column about this whole ordeal for Yahoo Finance back in March 2020.

2 Berkshire Hathaway’s equity portfolio was anything but impenetrable to the volatility that has shaken global financial markets this year. The company reported $ 1.8 billion in unrealized loss on its securities portfolio during the first quarter, which is comparable to the $ 4.6 billion in unrealized winnings it reported in the same period a year ago. (Unrealized gains or losses represent the change in the market value of securities that were not actually sold. Buffett has long been a critic of the accounting rule that requires companies to report these so-called paper gains and losses.)

For more on this, read my latest Yahoo Finance column: Why Warren Buffett ‘Never Made a Decision Based on a Financial Prediction’

One version of this post was originally published on TKer.co.

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