2022 has been eventful.
Stock market has been a lackluster as S&P dropped 16.5% since the start of the year. No matter if you are invested into growth stocks or value stocks, it has been a painful year so far.
The cryptocurrency market is now under immerse pressure as stablecoin UST crashed to zero bringing the whole cryptocurrency market with it. People are now reconsidering if cryptocurrency is a true hedge towards traditional equity market.
If you have already forgotten, we still have the Russia-Ukraine conflict, the dealing with post COVID-19 and Johnny Depp-Amber Heard trial ongoing. It is one perfect long storm.
Coming back to wealth management, it always interest me to see what the experts in the field are doing. In this case, one question that fascinates me is what would Warren Buffett do?
What Would Warren Buffett Do?
In 2020, COVID19 brought about a new trend. A trend on investing in high growth companies. Cathie Wood became an instant celebrity with her ARKK fund performing being up 300% from the bottom of March 2020 at one time. Warren Buffett hit the news around the same time. However, it was one where people thought he was losing his magic as his fund was underperforming the ARKK drastically.
As time passes, you can see from the chart above that there was a huge reversal and value investing is now respected again.
Disclaimer: The below discussion will be on the actions of Berkshire Hathaway (BRK) or Warren Buffett. This does not constitute any investment advice.
What is Warren Buffett doing now?
Warren Buffett invest with a mindset called value investing. In the very simplest form, it means investing into a wonderful business at a sensible price. The challenge is always to find out what is a wonderful business and what is a sensible price.
In the first quarter of 2022, BRK increase their exposure to Chevron (4th biggest position in BRK). This is a timely position as the world reconsiders to purchase oil from Russia.
They also added into Activision Blizzard (ATVI) and Apple (APPL). Interestingly, they purchase ATVI before Microsoft (MSFT) announced that they will buy ATVI at $95/share.
He have also added into Occidental Petroleum (OXY). This is another energy bet that he is taking.
Lastly, he added into HP (HPQ).
What does this tell you?
Personally, I think Warren Buffett has a good grasp of business flow in the United States. Since Biden took office, one of the things he did was to revoke the permit for the Keystone XL pipeline. I read with great interest but have no idea on the implication. Perhaps, this might be a reason why he started investing into oil.
The investment into ATVI was probably a value buy. In an interview Buffett said “It is my purchases, not the manager, who bought it some months ago. And if the deal goes through we make some money, and if the deal doesn’t go through who knows what happens.” Buffett said his decision came down to the fact that Microsoft’s purchase values Activision Blizzard at $95 per share. Activision Blizzard was trading at $75.60 per share as of the close of markets on Friday. Perhaps, he was buying for a good arbitrage opportunity.
Lastly, it is about investing in yourself. Buffett spend his time investing into himself. He reads at least 80% a day. During times of uncertainty, it’s more important than ever to be as valuable as ever, and as Buffett said, the best thing we can do is “be exceptionally good at something.”
What will you do?
Personally, I will be reviewing my own portfolio. I believe this is a good time to add new positions even in this current situation. Valuation has been depressed and perhaps a good time to dollar cost average now.
What will you do?
Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.
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The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.