Last week, Berkshire Hathaway (BRK-B) released its fourth-quarter 13F. Berkshire chair Warren Buffett is known for his value investing. However, Berkshire’s buying activity was surprisingly low in the quarter. After accounting for the stocks sold, the net buys were even lower as compared to the third quarter. Some of the prominent sells were Apple (AAPL) and Oracle (ORCL). Berkshire added Red Hat to its portfolio. The company was acquired by IBM (IBM) in the fourth quarter.
Markets fell in Q4
Buffett not buying stocks in a quarter when markets slumped could mean a lot of things. Berkshire could be looking at a major outright acquisition, or the company might also have bought back its own stock. However, it could also signal that Buffett, being a long-term investor, didn’t see value in stocks despite the sell-off.
Bond king Jeffrey Gundlach has also sounded a note of caution. In an interview with Yahoo finance, Gundlach said that investors that bought the dip in the fourth quarter have “gotten an economic and psychic reward so far. Once that buy goes underwater, it will accelerate the selling, because those people will turn into sellers.” In regards to the fourth-quarter market sell-off, he said, “I think that that’s just a taste of things to come.”
In December, as markets plunged, Jim Paulsen said in an interview with CNBC, “I do think we might be getting close to one last good buying opportunity, and one last run here before this bull finally does end.” If these views turn out to be correct, it could mean bad news for US President Donald Trump, who apparently sees market returns as an indicator of his administration’s performance. Meanwhile, markets (SPY) have been strong this year. NVIDIA (NVDA), Advanced Micro Devices (AMD), Micron (MU), General Electric (GE), and Microsoft (MSFT) have gained 17.3%, 29.7%, 32.2%, 33.8%, and 7.0%, respectively, based on yesterday’s closing prices.
Read Is Warren Buffett Expecting a Market Crash for more analysis.