Billionaire investor Warren Buffett has said a lot of memorable things in his decades as a stock market investor and sage.
One of the best known is his suggestion that investors should be fearful when others are greedy and greedy when others are fearful.
Is the recent stock market volatility the start of a Warren Buffett moment, when this advice comes into its own?
I think so – and reckon it could be a great opportunity for a long-term investor even with nowhere like as much to invest as the Sage of Omaha has at his disposal.
Buffett has been looking somewhat fearful
Over the past year or so, Warren Buffett has been buying some shares. But, more notably, he has been selling shares – on a large scale.
At the end of last year, his company Berkshire Hathaway was sitting on a record cash pile of $334bn. It has significantly reduced the size of its largest shareholding, in Apple (though it retains a sizeable stake).
Why? We do not know for sure. Buffett has hinted at various explanations, including tax considerations.
But remember that Buffett was doing this when the US market was racing ahead, with firms like Nvidia and Meta putting in very strong performances. That made a lot of investors greedy. Warren Buffett, by contrast, has looked to me as if he is increasingly fearful.
It’s possible that Buffett cast more light on this at the annual Berkshire shareholders’ meeting yesterday (3 May), but I’m writing this before the meeting, on 2 May.
The large share sales and record cash position suggest to me that, to some extent, seasoned market operator Buffett has been fearful about some US share valuations.
Could now be the moment to turn greedy?
Over the past couple of months, though, the wider market feeling on both sides of the pond has turned from one of greed to one that feels increasingly like fearfulness. Erratic and potentially costly US policy-making has seen huge amounts of value wiped off many shares.
I see that as a potential buying opportunity.
For example, one share I think value-hunting investors should consider is JD Sports (LSE: JD).
The retailer’s share price has tumbled 29% over the past year even after a 26% recovery from a low last month. I think that sort of volatility is a sign of the fearfulness currently seen in market.
Yet the company is firmly in expansion mode. Its huge new store in Glasgow’s primary shopping thoroughfare, set to open shortly, is not an isolated example. Rather, it is representative of JD Sport’s aggressive store opening programme of recent years, both in its home UK market and overseas.
The global market is key for JD Sports, which has operations spanning from North America to Australia. It has a proven retail formula based on a strong brand, deep customer understanding, and select unique products.
A key risk is weakening consumer confidence hurting sales. So far, though, the company seems unperturbed. It expects like-for-like sales to fall this year, but thanks to that store opening programme and acquisitions, it expects strong revenue growth overall.
The business remains solidly profitable and is forecasting profit before tax and adjusting items for this year of around £920m. To me, its current market capitalisation of £4.1bn therefore looks like a potential bargain.
