Buffett reduces exposure to risky assets: collapse in sight on the markets? Here’s how his investment portfolio has changed in recent months.
Warren Buffett changes strategy. The legendary investor and CEO of Berkshire Hathaway has changed his investment strategy, selling $17 million worth of shares in recent months. This marks a significant change in the financial moves of Buffett, who is known for his long-term buying strategies.
This change in strategy raises many questions among analysts and investors about what direction Buffett intends to take. Some fear that selling at period highs could herald a stock market crash.
Let’s see in detail what the securities sold by Buffett are, the reasons behind these sales, and the new strategy he is adopting.
The stocks Buffett sold for $17 million
In the first quarter of 2024, Berkshire Hathaway significantly reduced its holdings in several key stocks, marking a major strategic shift. Most of the selling involved reducing the massive stake in Apple, one of the jewels of Berkshire’s portfolio. Buffett sold about 13% of Apple shares (about 115 million shares), a decision made for tax reasons in anticipation of a possible increase in corporate tax rates. This operation allowed Berkshire to make huge profits and optimize its tax burden.
- Apple weekly graph
- Source: Tradingview
In addition to Apple, Buffett also reduced his stake in building materials maker Louisiana-Pacific by 6%. This move was strategic to rebalance the portfolio given market fluctuations. Another significant decision was to completely exit the stake in HP, reflecting a negative assessment of the company’s future prospects. Despite the loss, Buffett also chose to completely liquidate his stake in Paramount Global, demonstrating his commitment to reorganizing his portfolio towards more promising and safer investments.
- Paramount Global weekly graph
- Source: Tradingview
These overall sales helped generate significant liquidity for Berkshire Hathaway, which was then reinvested in safer assets such as Treasury bonds.
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Buffett’s new strategy
Warren Buffett’s new strategy focuses on preserving liquidity, reducing risk, and reflects a conservative view of the current stock market.
With government bond yields at multi-year highs, Buffett said he finds cash more attractive than risky assets.
This position was highlighted by the significant amount of cash held by Berkshire Hathaway, which reached $189 billion in the first quarter of 2024, up from $168 billion in the previous quarter.
- US 6-month bond yield
- Source: Tradingview
Buffett has invested in 3- and 6-month Treasury bonds, which offer a yield above 5%, a safe alternative to stock market fluctuations. This strategic move reflects its caution in an uncertain economic environment and its preference for low-risk investments with stable returns. Its recent stake in Chubb, a Zurich-based insurer, represents an exception to this selling trend. By purchasing nearly 26 million Chubb shares for $6.7 billion, Buffett demonstrated his ability to identify strategic investment opportunities even in times of market volatility.
Buffett has expressed his willingness to invest further if market conditions allow but stressed that he currently finds few attractive opportunities. He mentioned that the investment in Japanese trading companies made a few years ago was an exception, suggesting that only extraordinary investment opportunities can justify a change in his current cash preservation strategy.
In conclusion, Warren Buffett is adapting his investment strategy to respond to current market conditions, favoring liquidity and reducing exposure to risky assets. This change reflects a cautious assessment of the global economic outlook and a continued search for safe and profitable investments. Buffett’s strategy continues to evolve, but his focus on risk management and long-term value creation remains a constant in Berkshire Hathaway’s investment philosophy.
|DISCLAIMER
The information and considerations in this article should not be used as the sole or primary basis for making investment decisions. The reader maintains full freedom in his own investment choices and full responsibility in making them, since only he knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings.|
Original article published on Money.it Italy 2024-05-21 18:59:00. Original title: Warren Buffett cambia strategia. Vende questi 3 titoli per $17 milioni
