Are Warren Buffett stocks suitable for short-term investing?
Billionaire Warren Buffett’s stock purchases are closely watched and often copied. The “Oracle of Omaha” has a clear idea of earnings power, dividends and growth – a strict buy and hold strategy.
This is the popular perception.
As old-school industrial behemoths return to popularity — utilities, oil and gas, conglomerates — can Buffett’s magic work in the short term?
Big moves, finally
First, a bit of a step back. After at least six years of complaining of little to meaningfully recover, Buffett’s Berkshire Hathaway (BRKb) paid insurer Alleghany $11.6 billion last month. No surprise because Buffett loves insurers and it had been planned for a few years.
Buffett’s massive positions in Apple (AAPL) – 46.86% of Berkshire Hathaway’s portfolio – remain, as do huge holdings in American Express (AXP), Bank of America (BAC) and Kraft Heinz (KHC).
Last month, Buffett bought more shares of oil and gas explorer Occidental Petroleum (OXY), increasing his stake by a large margin, paying between $55 and $65 a share, it is believed.
He also increased his holdings in Chevron (CVX): Chevron is up nearly 55% over the past year and six months, while Occidental is up more than 75%.
Apple Inc. (AAPL): Berkshire Hathaway’s Largest Stake
Wake up, wake up
This oil stock performance is more like the small cap market, but supercharged by geopolitical turmoil not seen in decades.
So that’s the first lesson for near-term trading: follow the supply chain tensions, which are multiple – from the G7 calling on OPEC to increase production to the continued disruption of ports and containers that are extends over railroads and trucking routes.
If the West follows through on an international ban on Russian oil, then the price of crude must skyrocket.
“Wakey, wakey,” hedge fund manager Pierre Andurand recently said at a Financial Times commodities conference in Lausanne. He believes that the Russian supply on the European side is lost “forever”.
Andurand thought crude could hit $250 a barrel this year.
Follow Buffett’s Money
Can you make short-term gains by copying Buffett? Oil stock price numbers say yes. But Buffett has been building his oil holdings for many years – which is not the case for most short-term traders.
He also had little pressure on management, buying oil and gas stocks as multiples were at near-record highs and “mo-mo” tech stocks were in favor. A high-value environment, in other words, with many people looking for the same opportunities.
- Berkshire Hathaway stock has risen more than 30% in the past year, well ahead of the S&P (11%) and FTSE 100 (11.1%).
- Berkshire’s buying push is finally on the upside, after a long dry spell.
- Ignore the crowd and find value through your own efforts – a key Buffett principle.
Berkshire Hathaway Class B (BRKb) is up 14% year-to-date
He makes mistakes
Buffett is human and makes mistakes. He left Merck (KGaA) and Biogen (BIIB) last year after buying. He didn’t buy and keep. Buffett built his Biogen position at the end of 2019 but was sold between the first quarter of 2020 and the second quarter of 2021.
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It was prescient: Biogen’s stock has fallen further and further, from $468.55 per share on June 7, 2021 to $209 now, part of the decline spurred by Food and Drug Administration anxiety. (FDA).
Abbvie (ABBV) was a similar story. Buffett hoped to take advantage of the healthcare industry’s response to the coronavirus pandemic. He bought shares in the third quarter of 2020 but largely cashed out within six months.
Some of these moves seem to go against his investment philosophy: “If you’re not ready to hold a stock for 10 years, don’t even think about holding it for 10 minutes.”
It’s a pithy retort, but that’s about how much pivots on the drug approval process.
Quality management foresees a role. Investing in Tesco (TSCOI) is thought to have cost Buffett up to $444m after the British grocer and general merchandise retailer overstated its half-year profits by £250m ($326.8m). ) on September 22, 2014. “It was a huge mistake,” he said. told CNBC.
Know when to jump ship
Buffett’s short-term business vision does not exist. Buffett’s team spends a lot of time doing little. Or wait for the right moment.
When Buffett buys and sells quickly, it’s because he’s not afraid to move on.
He got rid of much of a nearly $4 billion stake in the Federal Home Loan Mortgage Corporation (Freddie Mac) in 2000 because he thought the US secondary mortgage player was taking too much risk.
The claim of higher future earnings made no sense. “I guess if you only see one cockroach, there are probably a lot,” he reportedly said afterwards. He went out.
Buffett likes to be 100% certain – or as close as possible. If you find yourself in a leaky boat, don’t fix it, he says. Find another one, quickly.