Warren Buffett is the greatest investor of all time. Not only has he amassed a fortune of around $80bn from investing, he’s also generated huge, market-beating returns for his investors over the long run.
Given Buffett’s phenomenal investing track record, it can pay to keep an eye on his movements. With that in mind, here’s a look at three moves he’s made recently.
Buffett is still building his cash pile
The first move from Buffett I want to highlight is that he’s continued to build his cash pile. At the end of June, his cash pile stood at a whopping $147bn, up from $137bn at the end of March. Part of this increase was the result of the sale of his airline stocks earlier in the year.
My take here? Buffett is still not seeing a great deal of value in the market. Clearly, he’s waiting for a better opportunity to buy. Having that amount of cash on hand will give him a huge war chest to go out and buy high-quality assets if share prices fall again in the near future.
Buying a bank stock
While he may not be seeing a ton of value, Buffett has been doing a little bit of buying. In recent months, he’s bought a large amount of Bank of America stock. In the space of a little over two weeks, he spent $2.1bn on the bank stock.
Like most bank stocks, Bank of America has underperformed this year as a result of the coronavirus. Year to date, its share price is down about 25%. Buffett clearly sees value after the recent share price decline.
I see this trade as an interesting contrarian move. Banks are heavily out of favour right now, due to the high level of economic uncertainty. However, if the global economy strengthens, their share prices could rebound.
If UK investors are looking to replicate this Buffett trade, they’ve plenty of options. Shares in Lloyds Bank, Barclays, and HSBC have all taken a beating this year and could be worth a look. That said, it could be a while before UK bank stocks bounce back.
Sticking to his ‘circle of competence’
Finally, Buffett has also recently struck a $10bn deal to buy Dominion Energy’s natural gas transmission and storage business. This is his largest deal since his takeover of Precision Castparts in 2016. “We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business,” Buffett said in a press release.
This strikes me as another contrarian move by the investing legend. While many investors are focused on the technology and healthcare sectors right now, Buffett is loading up on assets that are a little bit less exciting. In other words, he’s not getting caught up in the market hype.
This is a classic ‘stick to what you know’ trade from Buffett.
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Edward Sheldon owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Barclays, HSBC Holdings, and Lloyds Banking Group. 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.
Motley Fool UK 2020