Everyone expected the traditional annual letter of the Olaha oracle to get data and clues about the next movements of the famous background. However, there were few signs, but entrelinea. A veteran Berkshire Hathaway observer released an important conclusion.
Without a doubt, for decades, the annual letter to the investors of the Berkshire Hathaway fund, of the emblematic Warren Buffett, is almost an obligatory appointment and reading not only on Wall Street but in the rest of the world’s markets. All look for signals and data. But now more than ever, because the famous investor turns 60 in command of the fund and there was expectation of clues especially for the road map for the post buffet era, as well as investment opportunities, repurchases and dividends, the cash position, the role of investment managers. In that search for the Holy Grail, the analysts focused on the liquidity mountain with which he closed the last balancesince Buffett did not reveal his intentions in the letter. Therefore, the people of Marketwatch resorted to one of the most veteran managers and follower of the president of Berkshire Hathaway, Bill Smead, founder and president of Smead Capital Management, to interpret the letter of the so -called Oracle of Omaha. What did he say?
While Buffett did not show his cards, he It seems to be waiting for a great drop in actions before deploying its huge and growing cash reserveSmead said. In the letter, Buffett offered little that it was useful in guidance, but what he did indicate was that he does not see “Nothing convincing” In terms of purchase opportunities, that Berkshire continues to increase its cash reserve and that Buffett is prepared for “Wild Oscillations” In the values of the shares, the founder and president of Smead Capital Management, to William Watts of Marketwatch expanded. “Read between the lines … and will not be interested in buying until we have an abrupt fall”Smead said, who has been paying close attention to Buffett and Berkshire Hathaway for four decades. And with an “abrupt oscillation”, Smead does not refer to common correction. He believes that Buffett is preparing for a bearish market similar to the falls that followed the outbreak of the Puntocom Bubble in 2000, when the S&P 500 fell 49.1% from its peak to its minimum, or the falls during the 2007-2009 or the late 1960s and early 1970s.
Berkshire would always prefer to own companies, before cash
Watts points out that in his letter, Buffett took note that commentators have emphasized the growing battery of Effective and Berkshire cash equivalents, which increased even more above US $ 300,000 million at the end of fiscal year 2024. Buffett insisted that Berkshire would always prefer to possess companies, either controlling them to a large extent or directly buying shares of large companies, before cash.
“Despite what some analysts currently consider as an extraordinary cash position in Berkshire, the vast majority of their money is still in actions. That preference will not change “Buffett wrote. At the same time, Berkshire was a net seller of US $ 134,000 million in shares in 2024; And Buffet has previously lamented the difficulty of finding attractive opportunities, Watts added.
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For its part, Smead has argued that investors should prepare for a “Noah’s Stock Market”. In other words, intense and prolonged rain will fall. In a recent note, he said Investors should build a portfolio of ordinary shares “that floats when the two -year bearish market creates a sales waterfall between the magnificent growth shares and the passive owners of the S&P 500”. Smead argues that the greatest threat is inflation. Investors applauded the shares until they reached another round of historical maximums after Donald Trump’s electoral victory, and compared the moment with the victory of Ronald Reagan in 1980 and the consequent start of a several -year bullish market. The problem, said Smead, is that galloping inflation soon extinguished after Reagan’s victory, while now it seems that inflationary pressures are increasing. “We assume that inflation will not go down. Ask Port workers or Boeing operators what a long -term union contract means that increases their income by 8.5% annual compound, ”Smead argued in his recent note.
Buffet warned about “fiscal madness” and “lack of currency”
In his letter, Buffett warned against “Fiscal madness”which can evaporate the value of paper money. “In some countries, this reckless practice has become common and, in the short history of our country, the United States has been close to the edge. Fixed coupon bonds do not provide protection against the lack of control of the currency ”said buffett. Smead explained that he did not take that as an explicit warning about inflation. “The little that said (in the letter) that it was direct was so subtle that one would have to be an expert in subtleties to discover it,” he told Marketwatch. Smead summarized Buffett’s message in the following: “Do what I do, not what I say. They accumulate effective and are not too anxious to buy.”
Along these lines, Nir Kaissar, founder of Unison Advisors wrote in Bloomberg that the treasure of US $ 325,000 million in buffet cash is an early alert signal, and that the Oracle of Omaha does not intend to be an expert in timing the market, but knows when the actions are faces. While analysts highlighted from the letter the incorporation of Domino’s Pizza into the Berkshire portfolio and a greater reduction in their participation in Apple, for Kaissar, All these movements have been eclipsed by the collection of cash of US $ 325,000 million of Berkshire, almost double the company’s cash balance at the end of the year, and the greatest amount that Buffett has ever accumulated. It also occurs at a time when Buffett’s favorite valuation indicator – a relationship between the value of the stock market in relation to the size of the US economy – is at a record level.
Source: Ambito
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