Warren Buffett (Photo by Chip Somodevilla/Getty Images)
Warren Buffet is famous for his various valuable investing advices and philosophies. He earned billion of rupees just from investing in stock market. Today, buffet owns a multi-billion dollar company, Berkshire Hathaway.
Buffett uses Berkshire Hathaway to make investments in shares and various other financial instruments. With networth of nearly $70 billion, buffett is the 4th richest person on earth.
During any uncertainty all over the world, advice of Warren Buffett is considered very important. This is because Warren Buffett is investing in stock market from a long time and they have a great experience of investing in stock markets.
Warren Buffett is also famous for his evergreen advice “Be fearful when other are greedy and greedy when others are fearful“. This simply means that Buy when others are fearful about stock market and sell/avoid purchasing when others are greedy in stock market.
So, when stock markets are falling and others are selling in huge quantity during coronavirus, does Warren Buffett is following his rule and buying in this crash of stock market?
Let’s find out
Does Warren Buffett is investing in stock market during Coronavirus crash?
Interestingly, Warren Buffett invested roughly $2 billion cash of Berkshire Hathaway during Stock market crash of 2020 (from January to March 2020). This investment seems nothing when his company sold more than $5 billion worth shares in April only and is currently holding nearly $130 billion cash and equivalent instruments on its balance sheet.
Source: CNBC News
Unlike Financial crisis of 2008 where Buffett owned Berkshire Hathaway had invested actively in stock market to gain from low share prices, they are sitting quite silent during this stock market crash.
Why?
For a bigger reason, Buffett believes that this meltdown is different from financial crisis of 2008! He is expecting that spread of covid-19 (Coronavirus) and lockdown will bring some good changes in economy and how people do their jobs and spend their money.
“A lot of people have learned that they can work at home, or that there’s other methods of conducting their business than they might have thought from what they were doing a couple of years ago. When change happens in the world, you adjust to it” said Buffet.
Because of this expectation, Buffet’s Berkshire Hathaway sold their entire stakes in American airline companies for a less than they paid for them, or say with a good loss.
“The airline business, and I may be wrong, and I hope I’m wrong, changed in a major way,” said Buffet, noting that it has been through no fault of the CEOs of the companies.
Source: MarketWatch News
Warren Buffet is expecting that post lockdown, demand for airline companies may not see any good recovery and can continue to remain very weak, which will make it difficult for the airline companies to continue doing their business.
Beside of Airline, many other businesses too may not see any good recovery post lockdown. The name of such businesses will be clear only when lockdown will be lifted from country.
Also Read: What can we learn from previous multibagger stocks?
What others think on it?
Ramdeo Agrawal is a prominent Indian Investor and co-founder of Motilal Oswal Group. See what he thinks about Buffett decision to sell airline stocks, view on stock market and much more, shared by ET NOW.
Short summary of this video –
“Right now there is an uncertain world. You should be very careful in what you buy and at what price you buy. If you are not comfortable, it is much better to sit on your cash. Warren Buffet went on to say he does not want to be at the mercy of friends or any strangers. He is just saying it’s not time to be greedy. Buffett is not seeing deep value in this market,” -Ramdeo Agarwal
Here is what chief economic adviser of Allianz thinks about it
.@WarrenBuffet on
Why he’s not buying stocks in size: sensitivity to tail events and the ’08 reminder “we don’t see all the problems the first day.”
On whether others should buy now: Only if you expect to hold for a long time and are financially and psychologically ready to do so— Mohamed A. El-Erian (@elerianm) May 2, 2020
What it all means for you?
As it is a perspective of only Warren Buffett, you don’t need to worry much about it. However, it will be a good thing if you pay attention towards what Buffett is saying.
It is quite possible that after lockdown, some Industries may not be able to recover from coronavirus crisis. These Industries will be those which are getting or going to get impacted most from lockdown and post lockdown behavior of humans.
So, don’t assume that every Industry and shares of every company will be able to recover after lockdown. Some industries may face a long time for any good recovery, creating further pressure on them.
Beside of this thing, don’t invest just because share price is trading very low from 52 week highs or seeing great rally during lockdown period. You have to see and analyse whether company’s sales will be able to recover after lockdown or not and how much time it could take for recovery.
Also, if you are not comfortable on any stock (which you are holding right now), don’t hesitate to take exit even in loss as the money is yours and you should invest it only where you see good opportunity and return potential!
That’s all you have to remember from concerns of Warren Buffett.
Hope you use current levels in stock market wisely.
Good Luck 🙂
