As market sentiment worsens, many investors are selling their holdings. However, others see the situation as an opportunity. Iconic and ever-reliable investor Warren Buffett is one of them. Buffett’s initial reaction to the coronavirus was that “I like to buy stocks, so I don’t wish ill on anybody else. But if they want to sell them to me cheaper, I prefer it.”

He recently said in an interview that “[Markets] react to news in a big-time way,” implying that the market crash is reactionary and is likely to be short-lived. 

Warren’s mantra is ‘buy when there’s blood in the streets’. He is known for his investment philosophy of being greedy when others are fearful, and fearful when others are greedy. So oft-quoted that his musings have become common parlance for investors, it perhaps takes a crisis like this to remind you of the wisdom behind the quotes attributed to the behemoth business leader.

Sitting on a whopping $128 billion, last reported before the recent sell off, many have criticised him for not spending it sooner, and for not taking advantage of the last stages of the bull run.

Buffett’s investment strategy has always been to buy strong companies at a low value. Maybe he expected a downturn and was waiting for cheaper prices. Before the recently changed market conditions, he flagged that he was looking for an ‘elephant-sized acquisition’ but that everything was too expensive.

He also stated in an interview on Tuesday 10 March that the 1987 and 2008 financial crises were ‘much more scary, by far’. 

Buffett’s view reflects those of other major financial authorities like BlackRock, the world’s largest investment management company. 

“Market moves have been reminiscent of the financial crisis. But we don’t think it’s 2008, as the economy and financial system are on a much stronger footing,” said a BlackRock spokesperson. 

Goldman Sach analyst Peter Oppenheimer said this bear market is ‘event-driven’. It’s caused by the coronavirus, a single event, and not a structural collapse. So it should recover faster than structural bear markets such as the one in 2008, according to Oppenheimer.

From the low of the GFC, the S&P 500 climbed 70.5% in a year. It was up 98% two years following the low. 

Will history repeat itself and will the market rebound? 

Over the last six months, we’ve been looking for investments that act as a hedge or allow you to benefit from market volatility. 

We are now looking at a different kind of hedge – against the market rallying up or for those that think it is going that way.

We are not calling a bottom – far from it. We are looking at using these levels to average into the market and, using a small percentage of capital, setting yourself up for a position that the market can rally significantly from its low.

Click here to read more about an investment opportunity for those who hold the view that the market might rebound.

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