How does Warren Buffett look at stock markets? I’ll try to ask him personally in two months time!
The coronavirus has put a question mark over a journey I’ve had lined up for months. At the risk of mauling the great work of Aussie poet Kenneth Slessor, whose poem William Street, has that unforgettable line: “You find it ugly. I find it lovely”, I’ll soon be off to Omaha, Nebraska to listen to the chairman of an insurance company. You might think it boring, but I think it’s exciting!
The guy in question is 89 years of age and, with a bit of luck, I might get to listen to his 96-year-old business partner of 40 years, which will take the excitement factor into turbo charge territory. You think it boring, I think it exciting!
In case you’re not a lover of money-making, the gentlemen in question are Warren Buffett and Charlie Munger. Buffett is the CEO and chairman of Berkshire Hathaway, which is one of the greatest business success stories of all time. And the chart above proves it.
Yep, you’re reading right — the share price is $324,301! And a month ago, when the word ‘corona’ meant nothing more to most of us than a beer with a slice of lime shoved down its neck, the share price was $344,100!
The Switzer Self-Managed Super Fund holds four Berkshire Hathaway shares, but stop multiplying to find out what they’re worth and what I might have lost, because we have Berkshire Hathaway B stock, which are only $216 a pop.
Being a shareholder entitles us to go to the company’s Annual Shareholders Meeting shindig in Omaha on May 2, along with a crowd that can number over 16,000!
Did I say I find all of this exciting and so do a lot of other ‘strange’ people like me? And given what coronavirus has done to stocks this week, what Wazza has to say will be listened to, not just by the 16,000 who can squeeze into Omaha for the Oracle’s pronouncements, but by millions of investors who like to make money right around the planet.
This week Warren gave us a sneak preview of what he might say with his annual letter to Berkshire Hathaway shareholders. So how is he reacting/investing as a consequence of coronavirus?
Well, he started by advising us not to buy or sell stocks based on headlines:
“The real question is: ‘Has the 10-year or 20-year outlook for American businesses changed in the last 24 or 48 hours?’”, the billionaire investor said on CNBC. He keeps telling us that we should be long-term investors in quality companies/assets, because they have a history of delivering. This advice, I think, works pretty well with most things and the people you bring into your life.
Buffett has always been a buyer of companies that people use all the time, such as American Express and Coca-Cola. In recent times, he’s piled into Apple.
Whether you like these companies’ products, or not, the facts are that lots of people worldwide do and that’s how you make money out of stocks over the long term.
And he has a real bias for stocks.
“If something close to current rates [of interest] should prevail over the coming decades, and if corporate tax rates also remain near the low level businesses now enjoy, it is almost certain that equities will, over time, perform far better than long-term, fixed-rate debt instruments,” he told CNBC this week.
But this is what he always says because it nearly always holds true. And when he encounters stock market shocks like this damn virus, he often repeats what he said when the previous virus scared stock market players.
“It is scary stuff,” Buffett said, referring to the outbreak. “I don't think it should affect what you do in stocks.” He said Berkshire would “certainly be more inclined” to buy stocks following a sell off, at a time when the US economy was “strong, but a little softer” than it was six months ago.
“There's always trouble coming,” he said. “The real question is where are those businesses going to be in five or 10 years?”
This is a guy who’s heavily invested in Dairy Queen, which currently has 1,000 outlets in China that are closed! And imagine what AMEX will miss out from the millions of tourists from China who swan around the planet every day.
To get a handle on what AMEX, and the world, is missing out on, in 2017 stats from Nielsen told us that Chinese tourists were involved in 131 million trips overseas! These people are currently banned from travelling and spending but, like stock prices, they will make a comeback to airports and the world economy will be better for it. It’s just a matter of waiting for the short-term to give way to the longer-term.
Buffett has been famous for many memorable observations, but the one I’ve made money out of has been: “Be fearful when others are greedy and greedy when others are fearful.”
The stock market is a waiting game and the results play in your favour when you buy quality companies at bargain basement prices. Coronavirus is a human tragedy, and we have to hope medical science comes to our rescue ASAP. But with all the market-shocking events, these unwanted developments can take the stupid excess out of stock prices and create buying opportunities for those with a long-term view on investing.
Valuing quality assets and holding them for a long time is not only a great stock market lesson, but works pretty well in life as well.
Can’t wait ‘til May 2 and my day with Wazza.
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