Buffett's Missing Investment Appetite



Warren Buffett, along with several other billionaire investors have chosen to abstain from entering the market and prefer to hold assets in cash. With conglomerates and billionaires holding off their investments in 2020, some view this as a signal of famous investors losing their touch, while some also sees a potential stock market crash these billionaires are avoiding in light of questionable economic status. Numerous market players speculated that Buffett would deploy cash in a market undergoing a lot of correction, whereas oddly, Buffett preferred to save cash as if he suddenly lost his 'investment appetite'. One main factor that shows why the 'Oracle of Omaha' refrains from entering the market is induced hallucination, considering a lot of people stayed at home and choose to invest. The contrarian moves of newcomers bother Buffett as he doesn't condone mindless purchase and speculation. Mark Cuban, owner of the Dallas Mavericks franchise, explained more about Buffett's sentiment that the breathless rally will end when the magnitude of the pandemic breakdown is extensively known to the public and could possibly lead to a future market bubble burst. Moreover, reacting to current industry player motives, Howard Marks -- CEO of Oaktree Capital instructed to not look at buying stocks as a gambling game because reckless trading is not healthy to the whole community.


Amidst the current stagnant situation, Buffett chose to conduct his only major purchase by acquiring Dominion Energy for $10 billion. The step that Buffett took was unexpected, considering that many people are avoiding energy companies nowadays. Yet notably, Buffett always tries to invest in companies that have trusted business model and management. His decision is brought forth upon the possiblility that investing in energy companies will provide a convincing prospect as the demand will surge after the economy reopens. Acquiring natural gas storage and transmission assets also gave him exposure, given that natural gas is a valuable asset for general use. Still, Buffett's decision means that he only sticks to the field that he understands best. As Buffett himself stated, "We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business." He also considers that his energy business is one of the "lead dogs" of Berkshire's non-insurance operations beside the railroad sector.


Due to the surge of tech titan companies encompassing Google, Microsoft, and the likes, Berkshire Hathaway’s condition has gradually worsened in comparison. In the first three months, Berkshire announced a net loss of $ 50 million. Subsequently, Buffett ended up placing 8th in the Bloomberg Billionaires Index, his lowest position since 2012. Contrary to his well-known strategy of buy and hold forever, Buffett has opted to sell some of his major investments which include the numerous airline companies (US Airlines such as Delta, American, Southwest, United). This situation caused followers and market analysts to doubt his renowned strategy of value investing. Furthermore, Berkshire Hathaway committed unfortunate investment blunders in the troubled Wells Fargo (WFC) and Kraft Heinz (KHC) as well. Past events also show Buffett’s investment on Occidental Petroleum (OXY) taking a massive hit after the plunge of crude oil prices. On the brighter side, Berkshire’s $10 billion Dominion acquisition could very well signal Buffett overcoming his slump and potentially regaining his touch. Quoting Buffett's famous words, it seems that he is being "fearful when others are greedy" in 2020.


Sources:

CNBC Indonesia

Yahoo Finance

Bloomberg

CNN


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