E Do As Buffett Does, Not As Buffett Says

The majority of investors will recognize this man and have at least a general understanding of his investment approach – buy great businesses at a reasonable price. Following this strategy, Warren Buffett, CEO, and Chairman of Berkshire Hathaway (BRK-A )(BRK-B) has become one of the most successful investors, stock pickers, and asset allocators of all time. Almost anything Buffett says regarding investing is published in mainstream financial news everywhere. There have been over 50 books published discussing Buffett’s life and his investment philosophy, and tens of thousands of people flee to Omaha, Nebraska every year to hear Buffett and his counterpart, Charlie Munger, speak for hours at the Berkshire Hathaway Annual Shareholders Meeting.

One of Buffett’s most famous quotes is, “[I] simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."  This appears to be the philosophy he is following with his portfolio currently, but not quite what he is telling the public.

Buffett has told multiple financial news outlets that he believes stocks are reasonably priced, given current interest rate levels. According to USA Today Buffett said, “low borrowing costs have been a ‘powerful factor’ in equities values.” Similar quotes have appeared in the Wall Street Journal, Forbes, Yahoo! Finance and CNBC. On CNBC’s Squawk Box in October Buffett stated, “[Stock] valuations make sense with interest rates where they are. In the end, you measure laying out money for an asset in relation to what you’re going to get back, and the number one yardstick is U.S. government [bonds].” All of Buffett’s recent interviews have had a similar premise. However, if you look at Berkshire Hathaway’s most recent quarterly filing and annual shareholder letter, his portfolio asset allocation would prove otherwise.

As of September 30, 2017, Berkshire Hathaway has $109 billion in cash and cash equivalents on their balance sheet. This is up approximately $10 billion from their June 2017 10-Q filing, and up about $24 billion from their cash holdings just a year ago as of their September 2016 10-Q filing. According to The Motley Fool, “Buffett has said that he prefers to keep at least $20 billion on hand, so this represents nearly $90 billion of excess capital.” In his most recent annual shareholder letter, Buffett wrote, “every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.”

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Disclosure: Everything included in this article is not to be taken as investing advice because we are not investment advisors. Also, we have not considered your specific situation as your fiduciary. ...

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Beating Buffett 3 years ago Member's comment

I always try to emulate #Buffett when investing. No one knows the market better.

Robert Leonard 3 years ago Author's comment

What're your thoughts on his current actions versus what he's telling the media?

Michael Molman 3 years ago Contributor's comment

Equity valuations are definitely out of line with reality I can definitely understand why #Buffet would be skeptical about deploying capital in this market.

Charles Howard 3 years ago Member's comment

But why tell people one thing, and then do another?

Robert Leonard 3 years ago Author's comment

Charles, my question exactly.

Robert Leonard 3 years ago Author's comment

Absolutely - I just found in interesting that he'd be telling news outlets one thing, and doing something different.

Alexis Renault 3 years ago Member's comment

It's easy to see what #Buffett is saying. How do we find out what he's privately doing in reality?

Robert Leonard 3 years ago Author's comment

You can view Berkshire Hathaway's filings with the SEC, or other internet sources that provide this information. I personally really enjoy using www.dataroma.com

Alexis Renault 3 years ago Member's comment

Thanks Robert!