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Why did Warren Buffett just ditch these bumper tech stocks?

February 20, 2019

February 20, 2019

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Why did Warren Buffett just ditch these bumper tech stocks?

Warren Buffett’s famous quote about being fearful when others are greedy, and greedy when others are fearful is one of the most easily recognisable mantras of any investor in the world, and indeed at any time in history.

Warren Buffett’s famous quote about being fearful when others are greedy, and greedy when others are fearful is one of the most easily recognisable mantras of any investor in the world, and indeed at any time in history.

Yet, like just about everything in life, it’s easier said than done.

When the going is good for most investors, it’s extremely hard to take the blinkers off, and to look further afield. The temptation has always been to ride the wave of seemingly limitless riches in the short-term, believing that the good times will continue to roll. Suddenly becoming cautious or rearranging your portfolio seems to risk a painful opportunity cost that can be too hard to swallow if you get the timing wrong.

Warren Buffett, however, has no such qualms. Saying that Buffett and Berkshire Hathaway have made another smart play in the market is not dissimilar to saying we woke up this morning and have spotted that the sky is blue. What perhaps is surprising is that as consistently savvy as Buffett has been with his deceptively simple style of investing, many investors have failed to see the wheat for the chaff and kept track of what the ‘oracle’ is up to.

Speaking of Oracle (the company, rather than the man this time), Buffett is reducing his Oracle holdings at a time when tech stocks have been all the rage. Berkshire has sold US2.1 billion of Oracle stock in the fourth quarter, and has shed some Apple stock alongside it. While Apple was busy becoming the world’s first ever US$1 trillion company by market capitalisation, Buffett was busy selling 3 million shares, although it still remains the largest investment in Berkshire’s portfolio.

So, what about the being greedy when everyone else is fearful element? Well, Buffett has found his answer in the form of Canadian energy company, Suncor. In the midst of fears of a weak Canadian housing market and low global oil prices, Suncor announced its financials for Q4, which were disappointing to say the least.

Wall Street analysts were projecting US$10.09 billion in revenues for the company, Suncor reported only US$8.56 billion. Possibly even worse were the net income results, which showed US$580 million against a predicted US$814 million. Buffett and Berkshire pounced, doubling down on an investment they already had a stake in. Some rough calculations from Forbes’ Ethel Jiang show that Buffett purchased Suncor stock at an average price of $27.80 per share, 17% below where the shares have been trading in the past fortnight.

A perk of being Warren Buffett which investors will find even harder to replicate is that once news of his investment was revealed, Suncor shares jumped 4% seemingly on the back of that news alone.

While trying to emulate Warrant Buffett and Berkshire Hathaway is admirable, it’s also very challenging. Buffett consistently outperforms the market with bold moves based on extensive research and decades of experience.

As the old adage goes, if you can’t beat ‘em, join ‘em, and as such you’ll be glad to hear that Reach Markets will have a Berkshire Investment Opportunity opening soon. Register here to get the details.


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