Do Warren Buffett’s moves in 2020 suggest a 2021 stock market crash is brewing?
Warren Buffett has been busy collecting shares of some pretty surprising companies in 2020, including a gold miner Barrick Gold, health plays and Japanese sogo shosha companies. His recent bets have also been pretty tiny compared to Berkshire Hathaway a swelling treasury treasury and rather defensive in nature, which some argue suggests a stock market crash is on the horizon.
Why is Warren Buffett so cautious when most others are incredibly optimistic in 2021?
“Be afraid while the others glutton and greedy while the rest are afraid ”is Buffett’s mantra. But when the markets collapsed in February and March, why didn’t the man follow his own advice by loading up on cheap inventory while most of the rest were running for the hills?
Operations wholly owned by Berkshire and much of Buffett’s portfolio had already skated offside when the insidious coronavirus crisis hit. The COVID-19 pandemic came out of nowhere, and even though Buffett saw it coming in early January, the man really could not have done much to avoid being hit so hard by the impact of the coronavirus.
The best that Warren Buffett could have done is to manage the risks posed by the COVID-19 crisis as best as possible, even if it meant missing a huge advantage in the event of a V-shaped market rally, which we ended up getting. . .
Wholly owned companies under the Berkshire umbrella including GEICO, Precision Cast Parts and even See’s Candies have felt the force of the COVID-19 impact. Seeing that the man could not have gotten rid of such companies, given Berkshire’s limited agility to respond to the list of new risks, Warren Buffett did the best thing by making big changes to his portfolio, the ridding the vulnerable stocks of airlines and cargo. on defensive games including Barrick Gold miner and grocery stocks. More recently, Buffett has reduced his stake in Barrick, but I still think he’s playing it safe, betting on a handful of Japanese health care stocks and cheap trading companies.
Plus, Charlie Munger’s recent comments on a market frenzy doesn’t seem to suggest that Warren Buffett is ready to go greedy just yet. A stock market crash in 2021 could change that, however.
Do you still have to follow the Oracle in defensive games with the end of the pandemic in sight? Or could a stock market crash be on the horizon?
Unlike Warren Buffett, you don’t have businesses vulnerable to COVID that you can’t sell. You can mitigate the risks of COVID-19 more effectively by buying and selling titles to balance your dumbbell portfolio, which balances pandemic-resistant defenses with the games reopening.
While we’re not out of the woods yet with this pandemic, I think it makes sense to stay the course with the dumbbell wallet, perhaps with a slightly heavier weighting towards the reopening of the rooms. Just because Warren Buffett has been defensive for the last few quarters doesn’t mean he won’t get more aggressive with the games reopening in the new year. As such, I don’t think it’s a good idea to follow the man in Barrick Gold or weigh your portfolio too far on the defensive side, especially if your portfolio is already balancing pandemic risks.
In any case, I don’t think Warren Buffett is betting on a stock market crash occurring in 2021, but he’s certainly not ruling out one. And neither can you.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool service or advisor. We are Motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we’re posting sometimes articles that may not meet recommendations, rankings or other content. .
Silly contributor Joey frenette owns Berkshire Hathaway shares (B shares). The Motley Fool owns shares and recommends Berkshire Hathaway (B shares) and recommends the following options: $ 200 short put options in January 2021 on Berkshire Hathaway (B shares) and $ 200 long calls in January 2021 on Berkshire Hathaway (B shares).