2024 has been a very enjoyable year for billionaire Warren Buffett and investors in general. After suffering a stock market correction in 2022, the US and UK stock markets are doing well. And his investment vehicle, Berkshire Hathaway (NYSE:BRK.B) has posted double-digit gains since January.
While it’s good to see investor sentiment improving along with the economy, there are signs of a setback. In fact, the Bank of England (BoE) recently highlighted the risks of investors becoming complacent. If that’s true, following Buffett’s leading advice might be a smart move at this point.
“Be fearful when others are greedy”
AKA the contrarian investor, the “Oracle of Omaha” is known for not following the crowd. That’s been evident over the past few years as he’s aggressively bought stocks while the rest of the world has been panic selling. So does this year’s rally mean now is the time to start selling?
The Bank of England highlighted that UK asset prices are high relative to historical levels and suggested investors were not fully considering risks around inflation and geopolitical conflict that could pose major obstacles.
The US Federal Reserve has made similar comments, particularly regarding the technology sector, and Buffett’s team at Berkshire has actually been selling off large amounts of stock. apple This year, it seems he is certainly following his own advice.
Is the easy life coming to an end?
On the surface, Buffett seems to be preparing for the worst — after all, the sale puts the company’s cash position at about $189 billion, a new record — suggesting he’s hoarding cash. But there’s another explanation.
Even after the massive sale of Apple shares, the tech giant still represents nearly 40% of Berkshire’s investment portfolio, and the fact that Berkshire has not sold more shares to diversify indicates that his long-term commitment as a shareholder remains unchanged, regardless of macroeconomic conditions.
What about central bank statements? While worrying, it is worth pointing out that the Bank of England and the Federal Reserve have a poor track record with forecasts. In fact, the Bank of England predicted a sharp correction earlier this year that did not materialize.
Hope for the best, prepare for the worst
It’s inevitable that stocks will correct or even crash again, but no one knows when that event will occur. Bull markets are always met with bearish predictions of a crash, most of which never come to fruition. That’s why Buffett is always focused on playing the long game, and that’s exactly what he seems to be doing right now.
With a ton of cash in the bank, he’s ready to start buying bargains if stocks crash again.
This article What is Warren Buffett doing as the stock market rises first appeared on The Motley Fool UK
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Zaven Boyrazian has no investment position in any of the stocks mentioned. The Motley Fool UK has no investment position in any of the stocks mentioned. Views expressed on companies mentioned in this article are those of the author and may differ from official recommendations we make in subscription services such as Share Advisor, Hidden Winners or Pro. At The Motley Fool we believe considering diverse insights makes us better investors.
Motley Fool UK 2024
