Warren Buffett, the name sake of our “Invest like Buffett” collection, and his company Berkshire Hathaway always catch the news headlines.
The big news this week is selling Delta and Southwest Airlines. Buffett known for his long term positions and “get rich slowly” approach has caused a bit of a stir by selling in a down market. A quote many of us know he advises against.
Be fearful when others are greedy, and be greedy only when others are fearful.
So what is really happening here?
It could be as simple as rebalancing the holdings. Both airlines are held by Berkshire still, just under the magic 10% amount.
This could also be a bargaining chip for the future. Berkshire likes to negotiate better rates and buy great companies at a good price, if these airlines are still considered great by Warren once the planes are in the skies again, I wouldn’t be surprised to see them being picked up again.
Or this could be freeing up capital to buy some discounted stock Warren has had his eye on for a while. That said, free cash is not something Berkshire is short of .
The best bit about investing like Buffett, is you can just buy Berkshire Hathaway directly. You might want some fractional shares as this stock likes it’s high barrier to entry. For such a highly regarded long term investor, the company’s rankings are fairly average.
This is partly due to the size of the company, as we assess investments in a relative way a larger company has to work harder to create big swings or changes. e.g. A company with revenues of £1m can increase to £1.5m resulting in a 50% increase, whereas a company with revenues of £10m increasing to £10.5m is only a 5% increase.
Berkshire Hathaway is one of 23 stocks we rank which is considered “Mega Large” in terms of market capitalisation. That means they have a market cap over $200 billion.
There is no questioning the long term track record of Warren and his team, but does that mean they never make mistakes? Lots of investors attempt to replicate Warren’s success and fail, but does that mean he is the only midas touched investor out there?
Do you hope to outperform Mr Buffett, or are you trying to follow the leader?
As he says:
The real question is: ‘Has the 10-year or 20-year outlook for American businesses changed in the last 24 or 48 hours?’