Buffett is Back

by | Aug 16, 2013

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And to think. Only days ago, we were being told that the real cyclically-adjusted price of US stocks was putting them above their long-term averages, and that we shouldn’t be too surprised if they proved susceptible to a panic attack. But now, it seems, the world’s most successful investor, Warren Buffet, is back in the game.

BuffettWell, sort of. Warren Buffett was never actually out of the game, of course, because that’s not how you run a long term buy and hold strategy in the first place. But yesterday’s regulatory filings did show that the Sage of Omaha’s second-quarter investments were at their highest levels since 2011. And we’d also learned the week before last that his organisation’s cash pile has been reduced by some $11 billion since the start of this year – form from $47 billion in January to $36 billion at June 30th.

What’s more interesting about yesterday’s news is that the pattern of investing is still pretty much the same-old same-old that has long been Buffet’s trademark. His Berkshire Hathaway conglomerate raised its shareholding in General Motors by some 60%, from 25 million shares to 40 million, with a collective value of about $1.4 billion. And his new investments in Canada’s Suncor Energy, an oil producer, confirmed that his eyes are still very much on the hydrocarbons prize.

Other reinforcements came in the banking and media sectors – both of which are still facing turbulence at present. Buffett’s newly enlarged stake in Wells Fargo won’t have raised many eyebrows, but his decision to put $23 million into the broadcasting group Dish Network can be seen as a vote of confidence. Buffett is an old hand at media, by the way – he owns a chunky $2.3 billion stake in DirecTV, and has an interest in the Washington Post group.

A Tough Call on the Fundamentals

Can we take Mr Buffett’s new position as a vote of confidence in Wall Street, or is it simply a case of buying for the long term while the prices are a bit more attractive than usual? It was, after all, Buffett who declared more than 20 years ago that if you couldn’t stomach a 20% next-day drop in your shareholdings then you probably shouldn’t be in the market in the first place. So his recent support can’t necessarily be seen as anything more than a short-term view of the long-term environment.

One thing we might want to remember here is that the world’s most famous investor, who turns 83 at the end of this month, is increasingly handing over executive authority to his team of lieutenants, so it wouldn’t be too surprising if he were allowing some new ideas into the stable. That’s a prospect that has been bothering Berkshire Hathaway’s faithful followers for some time. But this year’s price surge from $140,000 in January to $172,800 has confirmed that he’s still got the touch. Long may it continue.

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