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How Warren Buffett’s portfolio is hurting and what he’s likely doing right now

The Motley Fool logo The Motley Fool 3/30/2020 Kevin Godbold
Warren Buffett wearing glasses and looking at the camera: close-up photo of investor Warren Buffett © Provided by The Motley Fool close-up photo of investor Warren Buffett

I read an article by Shawn Langlois a couple of days ago on MarketWatch. He’d analysed Warren Buffett’s portfolio of public companies held by Berkshire Hathaway. And citing information provided by Bespoke Investment Group, he estimated that the stocks were down by an average of 37% at the recent bottom of the general market plunge.

Buffett’s never seen anything like it!

Of course, in the couple of days since, Buffett will have seen many of his holdings bounce back up a bit. But the billionaire’s stock picks are not immune to market volatility. And I’m hoping that may make you feel a little more comfortable with the performance of your own portfolio recently.

Every stock in the Buffett stable was down. Names such as Apple, Bank of America, Coca-Cola, American Express, Wells Fargo, Kraft Heinz and others. But Buffett himself is barely raising one of those famous eyebrows.

According to Langlois, Buffett did say earlier in the month that he’d never seen anything like the coronavirus pandemic in all his years of investing. But “if you stick around long enough, you’ll see everything in markets,” he told Yahoo Finance. “And it may have taken me to 89 years of age to throw this one into the experience.”

Of course, Buffett is as cool as a cucumber about the whole affair. He’s known for imploring us all to become comfortable with reversals that can take our portfolios down by 50% and more. And we mustn’t sell up in a panic and run for the hills. Instead, he says “be greedy when others are fearful” – I’m sure you know the tune by now!

Focused on allocating capital

Indeed, instead of panicking, I reckon Buffett is probably focused on where he can invest some of the billions of cash he’s sitting on. The money has been waiting for times such as this, and now he’s probably going to find a new home for some of it.

And that’s what I’m doing too. Now’s the opportunity to go shopping for shares backed by strong, cash-generating and well-financed business. I’m looking for companies with robust quality metrics, high profit margins, a consistent record of trading, incremental growth and an identifiable niche in the market that’s defendable.

But I’m not that clever, because I got all those ideas from Buffett. And he’s a billionaire because of his approach to investing, whereas I’m not! However, I think every individual investor can benefit from studying Buffett’s career, techniques and wisdom. He broadcasts loud and clear, and one of the best sources of information is his library of shareholder letters he produces for those holding Berkshire Hathaway stock. Happily, he makes the letters available to all. Just Google it.

But if you haven’t the time or inclination to pick your own shares, don’t let it put you off investing in the stock market. Simple, low-cost, passive index trackers, and managed funds, may also serve you well in the years ahead.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK owns shares of and has recommended Apple and Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares) and short January 2021 $200 puts on Berkshire Hathaway (B shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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