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Is Warren Buffett Expecting a Market Crash?

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Feb. 19 2019, Published 8:13 a.m. ET

Warren Buffett

Last week, Berkshire Hathaway (BRK-B) released its fourth-quarter 13F. Markets were eagerly awaiting the filing to get a sense of how Berkshire chair Warren Buffett deployed its $100 billion cash pile in the quarter. US equity markets (SPY) witnessed a sell-off in the fourth quarter that seemed to offer a good entry point.

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Sell-off

Several fund managers saw the fourth quarter sell-off as a buying opportunity. In December, hedge fund manager David Tepper said in an interview with CNBC that the market sell-off could be used to “nibble at some stocks.” Speaking with CNBC, Jim Paulsen said, “We’re getting close to the bottom.” However, Paulsen also added a note of caution: “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.”

US President Donald Trump also called it a bottom in December. Speaking with reporters on December 25, Trump said, “So I think it’s a tremendous opportunity to buy. Really a great opportunity to buy.” However, Berkshire’s 13F didn’t have any big bang purchases. After accounting for stocks sold, Berkshire’s net buys in the fourth quarter looked like a drop in the bucket considering its massive cash pile.

Fourth-quarter 13F

Berkshire added some stocks including General Motors (GM) and added to its banking holdings (BAC) (JPM). However, it exited Oracle (ORCL) and lowered its stake in Apple (AAPL). The company also added Suncor and Red Hat (RHT) to its portfolio. In October, IBM (IBM) announced that it would acquire Red Hat.

As Buffett played it safe in the fourth quarter, one could infer that the legendary investor is expecting more downside. However, we should wait for the upcoming quarterly earnings to see whether Berkshire bought back its stock in the quarter.

In the next article, we’ll see how markets reacted to Berkshire’s 13F.

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