Berkshires worst performance in 10 years? Buffett: we are better at defense!

category:Finance
 Berkshires worst performance in 10 years? Buffett: we are better at defense!


Its five years since Berkshire Hathaway last acquired the elephant.

In 2015, Berkshire Hathaway agreed to buy precision parts for $32 billion. At that time, Buffett warned shareholders that it might be difficult for him to make another big purchase. He also wrote in a letter to shareholders in February 2019 that those companies with good long-term prospects are currently sky high.

Last November, Tiffany invited Buffett to make a bid after receiving a $16.6 billion offer from luxury giant LVMH. Although Buffett helped Tiffany during the financial crisis, and Tiffanys business can add strength to the jewelry company acquired by Berkshire Hathaway, Buffett was reluctant to bid with LVMH and politely refused the request.

Buffett also quietly bid $140 per share for techdata, the worlds second largest computer marketing company, last year, but retreated again after Apollo raised its bid price to $145 per share because he didnt want to be known for participating in public company auctions.

Buffett said he is also looking for big acquisition opportunities, but as a value investor, he does not see exciting opportunities in the current market.

As Berkshire Hathaway generates a lot of cash from its proprietary business and receives dividends from its securities investment, the cash reserves in its balance sheet currently account for about 1 / 4 of its market value.

Buffetts last route to cash for Berkshire Hathaway is to buy back shares. Even in this regard, Buffett tends to slow down.

Since Berkshire Hathaway adjusted its buyback policy in 2018, Buffett and its vice chairman, Munger, have more discretion. But in the first three quarters of last year, Berkshire Hathaway repurchased a total of $2.842 billion in shares, a fraction of what a company with $128 billion in cash reserves is worth.

Does Berkshire Hathaway fall to the altar?

Since 2009, Buffett has always stressed in his letter to shareholders that the defense of Berkshire Hathaway is better than the attack, Zhang yingyu, a long-term shareholder of Berkshire Hathaway, an investment analyst at NCI and a manager of Buffett Research Institute of Asia Australia International Investment Agency, told the international financial news. That is to say, when the market performs well, Berkshire may lag behind the S & P 500 index; but when the market performance is negative, Berkshire will probably outperform the market.

From the historical data, we can see that in 1966, 1969, 1973, 1977 and other strong years, Berkshire Hathaway company did not perform well, while in 1967, 1970, 1975, 1984 and other weak years, Berkshire Hathaway company showed a strong defensive ability, and its performance was often better than the market.

Therefore, according to Zhang yingyu, in terms of the historical performance of Berkshire Hathaway, the results in 2019 are not unexpected.

In addition, Zhang Nan, an analyst at the apur Research Institute, a shareholder of Berkshire Hathaway, told the international financial news, Buffett has opposed the new rule of GAAP (generally accepted accounting principles) several times, which requires that unrealized portfolio capital gains and losses be included in profit statistics, because this change in market price will make Berkshire Hathaways profits happen repeatedly. Volatility.

Therefore, Buffett suggested that Berkshire Hathaway investors focus on operating profit, not on profit or loss, and Berkshires real p / E ratio is much higher than the stock price.

In the past year, U.S. stocks have performed well, with Dow Jones Industrial Average up more than 22%, S & P 500 up nearly 30%, and Nasdaq up more than 35%.

But even the most famous value investors can hardly find investment opportunities in the securities market. Mohit Oberoi, an analyst at market realist, a financial website, said it could be Buffetts subtle warning to investors.

With the market close to its historical high, there are few high-quality companies in urgent need of funds, and those companies in need of funds do not meet the requirements of Buffett and Berkshire Hathaway. Oberoi said.

Since taking charge of Berkshire Hathaway in 1965, Buffett has avoided almost every crisis and seized every opportunity, Zhang yingyu told the international financial news. That is, when the market risk increases, reserve cash in advance to resist the risk, and copy the bottom when the stock price is relatively low.

A similar thing happened in 2008-2009, during which Buffett made an investment of about $50 billion, which provided Berkshire Hathaway shareholders with long-term high-quality returns.

According to Zhang Nan, the cash pool of Berkshire Hathaway company increased unprecedentedly from 1998 to 1999 before the 2000 Internet bubble. In the 2005-2007 years before the financial crisis in 2008, the company also had a large amount of cash. After the two crises, from 2000 to 2003 and 2007 to 2009, Buffett took advantage of the market downturn to buy a large number of undervalued stocks, making Buffett the richest man in the world in 2008 when he was wandering in the wind and rain. As a long-term shareholder of Berkshire Hathaway, we are optimistic about Buffetts current large amount of cash and look forward to the next wonderful large-scale investment of Berkshire Hathaway. Zhang Nan said.

According to Zhang Nan, the cash pool of Berkshire Hathaway company increased unprecedentedly from 1998 to 1999 before the 2000 Internet bubble. In the 2005-2007 years before the financial crisis in 2008, the company also had a large amount of cash. After the two crises, from 2000 to 2003 and 2007 to 2009, Buffett took advantage of the market downturn to buy a large number of undervalued stocks, making Buffett the richest man in the world in 2008 when he was wandering in the wind and rain.

As a long-term shareholder of Berkshire Hathaway, we are optimistic about Buffetts current large amount of cash and look forward to the next wonderful large-scale investment of Berkshire Hathaway. Zhang Nan said.