So today we got this article on Berkshire Hathaway Inc, Warren Buffett’s main company investing $24 billion in third quarter.
Warren Buffett buying shares when stock market is down is not new information. But it’s the magnitude of it that is surprising.
The S&P 500 was not down a lot. certainly not down the 50% we seen in 2008 bear market.
So why did he invest the most in 15 years for a particular period?
The last time Buffett invested more than $20 billion in a period was 2008 when he did it in both the second and fourth quarters of the year. Buffett deployed more than $70 billion that year, including $10.1 billion on stocks, as the S&P 500 posted its biggest decline since 1937. This year, Berkshire bought $11.4 billion of stocks in the nine months ended in Sept. 30, while selling $885 million of equities.
Cash holdings dropped to $34.8 billion at the end of September from $47.9 billion on June 30. The hoard is replenished from maturing securities and profit from investments and the company’s more than 70 operating subsidiaries.
Now Buffett have shown in the past that he is comfortable in keeping a lot of cash when there is no good opportunity. What does he sees in a 14% drop in broad index valuation?
Unless against the historical low interest rate, stocks look very attractively value and the opportunity cost of staying in cash and losing purchasing power is too high.
In any case, you seldom go wrong with taking his queue but from past experience he never always bought at the lowest point. Still would you fancy a purchase of Berkshire B Shares at $76?
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