The most famous investor in the world currently sees little value in the global stock market.
Warren Buffett has used a small portion of his massive cash to buy back shares in Berkshire Hathaway, the first major new investment in his fund in nearly three years.
While the Sage of Omaha has increased its stake in Apple during this time, he and his colleagues in Berkshire have not found a good home for their $ 104 billion stack since January of 2016, for $ 32.1 billion had paid the aircraft parts manufacturer Precision Castparts.
Warren Buffett has used a small portion of his company's massive cash stack to buy back shares in Berkshire Hathaway, his first major new investment in nearly three years.
In a move suggesting Buffett, undervalued for his long-term value investing strategy, is undervaluing the stocks of his own investment giants, he spent $ 928 million on the buyback of Berkshire's stock.
The move came when Berkshire reported that its operating income doubled from $ 3.44 billion in the third quarter to $ 6.88 billion in the third quarter of the prior year, partly due to lower cash outflows from the insurance business ,
"Warren Buffett's decision to spend the massive cash stack of his Berkshire Hathaway investment vehicle for a share buyback is making headlines as the legendary investor struggles to find a company he wants to purchase at a desired price "Says Russ Mold, Investment Director at the online platform AJ Bell.
Big and small investors on both sides of the Atlantic recently went through a roller coaster ride. Equity markets were corrected in March, followed by a booming spring-summer market and a further correction from August to September.
The FTSE 100 index is well above its high of almost 7,900 points in May and is currently trading just above the 7,100 mark.
Berkshire Hathaway has steadily reduced the share of its total investment in US Treasury bonds while increasing its share of equities and cash and cash equivalents. More than half of the fund is held in private, unlisted companies.
However, when he looked at Berkshire's balance sheet, Mr. Mold noted that Buffett does not appear to be oppressed by listed companies and his money is very suspicious of fixed-income or government bonds. Berkshire continues its downward trend since 2003 & # 39 ;, he said.
Berkshire Hathaway currently has about 30 percent of its stock, about 15 percent in cash and 2.5 percent in fixed income (US government bonds). The remaining more than 50 percent are held by private unlisted companies in which Berkshire either holds or participates.
"Buffett may believe that US government bonds are poor value given the relatively low historical returns and rising inflation (and, above all, wage inflation)," Mold added.
Since the beginning of 2001, Berkshire has been continuously withdrawing from the US government bonds.
While cash [holdings at Berkshire]Including short-term Treasury bills, the record is $ 103.6 billion. This represents 14.1% of Berkshire's assets, compared with 16% at the end of 2017 and well below the 24.5% in 2005, when Buffett clearly began to dispel doubts about the bull market started in 2003, which had no wind in 2007 and 2008/09 scratched.
"It also stands out how shares with a stake of $ 17.5 billion in Kraft-Heinz now account for 29.7% of Berkshire's assets, not too far from the highest mark of the last two decades, early in 1999 it's 32%. "
By booking a US equity market, Berkshire Hathaway has increased its cash holdings and the value of its holdings.
Berkshire's results were even better than Wall Street's $ 6.11 billion, according to the Reuters news agency.
After heavy losses last year due to three US hurricanes and an earthquake in Mexico, insurance revenues in the third quarter were $ 441 million, compared to a loss of $ 1.4 billion a year ago.
Berkshire said third-quarter net income rose an amazing 355 percent to $ 18.5 billion, which was distorted by new accounting rules. Buffett warned that new rules on return on capital could lead to "wild and capricious" earnings, and advised investors to look at operating income instead.