Warren Buffett is widely regarded as the greatest investor of all time. So, when he makes a move, it’s worth taking note.
Recently, Buffett has been making a number of interesting moves that stand out. Here’s a look at two important developments that came to light at the 2020 Berkshire Hathaway annual meeting held (virtually) on 2 May.
Enormous cash pile
One key takeaway from the meeting is that Buffett is currently sitting on an enormous pile of cash. This isn’t totally new news. At the end of September, Berkshire Hathaway had a record $128bn in cash and short-term investments. At the end of March, however, this cash pile had increased to a colossal $137bn. So, what does this tell us?
Well, put simply, it tells us Buffett still isn’t seeing a lot of value on offer right now, even after the recent stock market crash. It suggests he’s waiting for another pullback.
Indeed, when quizzed as to why he hasn’t put some of that money into the market after the recent crash, Buffett said: “We have not done anything because we haven’t seen anything that attractive.”
And when asked why he hasn’t bought back Berkshire Hathaway stock recently, Buffett replied: “The price has not been at a level where it really feels way better to us than other things, including the option value of money, to step up in a big way.”
So, clearly, Buffett thinks it’s worth holding on to cash right now. Should stocks fall further, cash could provide him with powerful options.
I think there’s a tip for UK investors here. Having a bit of cash on the sidelines at present, ready to deploy if markets fall again, could be a sound move.
Buffett just sold all his airline stocks
Another important takeaway from the meeting is that Buffett recently dumped all his airline stocks. Previously, he had large stakes in American Airlines, United, Delta, and Southwest Airlines.
When asked why he’d sold his stake, he said the airline industry has been “really hurt by a forced shutdown by events that are far beyond our control.” He added: “The world has changed for the airlines.”
I think there’s another tip for UK investors here. Stocks, such as International Consolidated Airlines (which owns British Airways) and easyJet, could be risky investments in the short term. The same goes for other stocks in the travel industry, such as cruise ship operator Carnival.
This is something I’ve discussed in a few recent articles. Ultimately, the outlook for these types of companies has changed dramatically over the last few months. They may face significant challenges in the years ahead.
If you’re looking to buy stocks right now, I think you’re much better off focusing on companies that are still ticking along nicely, despite the challenges the world is facing.
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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Carnival. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.