Editor’s note: This article was first published in November 2011. It cites third-quarter 2011 figures, including Berkshire Hathaway’s $23.9 billion of investment in the quarter, the largest in 15 years according to El País, and the company’s large gains described as “current” at that time.
We’ve often heard that “crisis equals opportunity” or that “the rich get richer in times of crisis“. Many people may think these sayings hide a mystery available only to a privileged few, but the truth is that the secret is there for everyone. We just have to watch what the big investors do, in this case our dear and much-admired Warren Buffett.
At the end of September, Warren Buffett said he was fully prepared to make big investments if the market was cheap. At the end of October, Buffett pulled his exposure out of Europe, “coincidentally” a few weeks before the official warning from US banks about a new recession in Europe in 2012. We expect to see Buffett back in Europe as soon as our shares get cheaper. According to El País, this last quarter Buffett invested a far larger amount than any investment he has made in the last 15 years.
Of course, his biggest investments have been in the US market through Berkshire Hathaway. Buffett made his largest investment on the day the S&P 500 fell the most, following his main piece of advice: “Be greedy when others are fearful and fearful when others are greedy.” So at a time when every investor was getting rid of their shares, Warren Buffett made his biggest purchase, and, it must be said, it’s currently showing large gains.
This last quarter, Buffett invested $23.9 billion, 65% of his portfolio, in stocks classed as “commercial, industrial and other”. He has also increased his holdings of financial stocks, as well as adding to his positions in consumer stocks during market dips.
With a few exceptions, as a general rule this great investor has been anticipating the market perfectly. I’m completely sure Buffett takes no pleasure in the agony the world economy is going through, but there’s no doubt he knows exactly how to take advantage of it. When the crisis ends (because we’re counting on it ending at some point), Warren Buffett will have made billions from it.
Without a doubt, Warren Buffett’s investment method is very effective, but remember: be careful about investing like Warren Buffett if you’re not Warren Buffett.
Further reading
- Seeking returns in the US stock market
- Quotes from the world’s greatest investor, Warren Buffett
- The greatest investors in history and their returns
Featured image: JonClee86, CC BY-SA 3.0, via Wikimedia Commons.
