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Warren Buffett, the legendary investor and chairman of Berkshire Hathaway (NYSE:BRK.B), is renowned for his timeless advice. “Be fearful when others are greedy, and greedy when others are fearful,” he once famously told us.
His investment philosophy has guided countless investors through market cycles. Recent events have demonstrated just how prescient his warnings can be.
As markets soared in recent years, he took a cautious approach. He was quietly selling stocks and building a record cash reserve. Now, with markets experiencing significant volatility, the time to be greedy may be approaching.
Buffett’s foresight
His actions over the past year have been a masterclass in contrarian investing. While many investors continued buying richly-valued US stocks, Buffett was quietly reducing exposure to equities. At the end of 2024, Berkshire had amassed an incredible $334bn in cash and had $234bn in US Treasuries. In short, he was anticipating some form of volatility or downturn in the stock market.
Buffett’s caution proved justified as markets entered a period of Trump-induced volatility. US and global markets have slumped and the Nasdaq experienced particularly sharp declines, entering bear market territory amid concerns over rising interest rates, geopolitical tensions, and slowing economic growth.
For those who heeded Buffett’s warning, the sell-off presented an opportunity to avoid losses and position themselves for future gains.
Berkshire has plenty of opportunities
Let’s be honest, the market’s a bit of a mess. Trump’s administration has taken us in several directions over the past three weeks. It’s hard to gauge what’s going to happen next.
However, the market turbulence has created significant price dislocations across sectors. Many high-quality companies have seen their valuations decline despite maintaining strong fundamentals. Broadly, this environment aligns with Buffett’s philosophy of seeking undervalued assets during periods of fear and uncertainty.
First and foremost, he may see this as an opportune moment to top up on some of Berkshire’s existing holdings.
| Company | Portfolio Weight (%) |
|---|---|
| Apple | 28.1% |
| American Express | 16.8% |
| Bank of America | 11.2% |
| Coca-Cola | 9.3% |
| Chevron | 6.4% |
| Moody’s | 4.5% |
| Occidental Petroleum | 4.2% |
| Kraft Heinz | 4.0% |
| Chubb Limited | 3.2% |
| DaVita | 2.4% |
The ‘Oracle of Omaha’ may wait
Of course, Buffett’s more cautious than most and will only invest when his conviction is strong. Many analysts and market commentators believe the US is heading towards recession and this would likely push stocks a lot lower. This is also my view. I’m being cautious today in event that better opportunities will come my way in the coming months.
The so-called Oracle of Omaha has emphasised the importance of patience and discipline during turbulent times. While the temptation to act quickly may be strong, investors should focus on thorough research and long-term thinking. After all, it can be incredibly difficult to time the market.
Personally, I was alarmed by his decision to hoard cash. So I built up a larger cash holding myself and bought some Berkshire stock. However, moving sooner would have helped me. Right now, I’m not buying any more Berkshire stock. Instead, I’m focusing on undervalued businesses, just like Buffett often does.
