New all time highs on the US stock markets puts a smile on the face of every investor. Well, apparently not all investors. Part 1 of a series on Buffetts typical attitude in the market
Super investor Warren Buffett is a typical sniper when it comes to finding the right investment for his portfolio. Buffett prefers cash over stocks that do not qualify for his selection.
The amount of free cash is piling up for Berkshire Hathaway, the investment company of Warren Buffett. Traditionally Buffett uses the stable cash flows that flow out of his insurance companies to buy new stocks on Wall Street. With the new sky-high stock prices on Wall Street, it becomes harder to find new long term investments.
This year, Buffett bought securities worth $2 billion. This is less than a third of the amount he purchased last year. The amount of free cash Berkshire Hathaway currently has, is over $50 billion. In the quarterly results presentation of Berkshire, Buffett stated that he is focussing more on the profitability of his assets. He used to focus on the returns of his insurance activities, but now he is keener to improve the returns of his other companies as well. It’s an understatement to say that he did a good job on that. The profitability of Berkshire Hathaway improved by 41% year-on-year.
Buffett is copied by many investors from all over the world. The returns of the investment activities from Buffett are impressive because Buffett has proven that his strategy always works in the long term. For many decades, Berkshire Hathaway has been one of the most profitable investment companies in the world.
(Stock price of Berkshire Hathaway, last 10 years)
Investors noticed that Buffett is always right and therefor the easiest way to make money is to copy Buffett's portfolio. It is commonly known that Buffett knows how to maximize returns by leveraging his company with very cheap debt. His credit rating is so good that he is able to borrow money for an extremely low interest rate. This trick is obviously not possible for most investors. However, copying Buffett has been a good way to make some money on stock trading. Will it still be when Buffett keeps waiting for the right opportunity? Please check the next parts of “a series on Buffett”. In the next part I will explain the Berkshire leverage trick.
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