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Warren Buffett is among the most successful investors of all time. He’s amassed a fortune worth over $100bn and, as such, it’s no wonder that the market is so heavily influenced by his commentary and the trading activity of the firm he heads — Berkshire Hathaway.
So what’s happening now? Let’s take a closer look.
Berkshire sells billions
Last week, we found out that Berkshire Hathaway had sold shares worth $13.3bn in the first three months of the year. During that time, the holding company only invested $2.9bn in shares of other publicly-traded businesses. It also put $4.4bn towards repurchasing its own stock.
Moreover, Berkshire’s cash pile has risen to $130.6bn since the start of the year — its highest level since the end of 2021. The company has the vast majority of its cash in short-term treasury bills and bank deposits.
What they’re saying
Buffett and business partner Charlie Munger don’t mince words. In April, Munger said that investors should lower their expectations for the year as the Federal Reserve raises interest rates and the economy slows.
Buffett went one step further at the shareholder meeting last week. “The majority of our businesses will actually report lower earnings this year than last year,” he told investors.
Noting the previous two years of low rates and high government spending, Buffett added: “That period has ended… It’s a different climate than it was six months ago.”
Buffett even suggested that the changing environment had taken Berkshire by surprise. “A number of our managers were surprised. Some had too much inventory on order,” he also noted.
What does this mean for me?
Well, Buffett and Munger aren’t the first investors to suggest US stocks might see some downward pressure this year.
Legendary British investor Jeremy Grantham — the co-founder of GMO, an investment management firm established in 1977 — is forecasting that the S&P 500 will fall 16.7% during 2023.
So as the S&P 500 is up around 9% this year, there could be a lot of downward movement to come if Grantham’s correct.
And it’s worth noting that Berkshire invests primarily in US stocks. In fact, there are very few UK holdings at the best of times. So this could be a warning.
As an investor, I’m becoming increasingly concerned about buying US stocks. I do have several US holdings, but they’re often international companies listed in the US. I think I’m going to keep it that way.
Instead, I’m focusing on the UK, where I still see value. UK-listed stocks like Barclays haven’t been widely popular for a while. However, the majority of the FTSE 100‘s revenue is generated internationally. But the key thing is valuations are low, and I can’t see them falling much further.
Moreover, when investing in the UK, I also don’t have to worry about currency fluctuations wiping out my gains.
