Buffet Sells

The Baptist

Established member
715 45
Hi

I have read an interesting story on Warren Buffett who claims he finds no value in the market at present an is a seller of many holdings in hist vast portfolio. This despite sitting on 27Bill $ cash.

May be an interesting steer for those that bias to long as the wise man has tipped his hand.

Watch those big US indices and resulting locals for that matter. Just a bit of funnymentals for us TA's to consider.

Happy (short?) trading.

Linl below

http://65.54.244.250/cgi-bin/linkrd...ttp://www.fool.com/m.asp?i=1132995&u=10013615
 

The Baptist

Established member
715 45
I have pasted the article in word and attached as The link was thru Hotmail to The motley Fool.

TB
 

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  • buffett sells.doc
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nomish

Junior member
42 0
Interesting article. some points ild like to point out.

sitting on US$27 billion is not just sitting, just think about that sitting in ur high interest account, or even in a low interest current account. its make shed loads. thats got to be around 100 million a year.

and even when ur sitting on 27billion, u have more buying power than a small country put together. You could buy any old stock good or bad, and the fact u bought it would push the price up once its in the public domain.

but then u need to think, buffet is at the age where he should be enjoying the good old life.
 

chump

Senior member
2,212 274
This is interesting,but easy to misunderstand if you only take a superficial look.

What is Buffet's strategy/timeframe for playing the market ?

If he sells to accumulate cash then he presumably is placing himself to buy value at average lower price?

If the above holds true that tells us what is view of the market is. That he thinks it is on average overpriced. However, it does not tell us at what time he thinks buying opportunties are going to arise.

Cheers
 

Rainmaker

Active member
201 3
buffett plays a very long time frame. his choice of investments is limited due to the scale of berkshire hathaway's investments. he is not a trader but a long term investor. he also tends to avoid "growth" or tech stocks, but goes for fundamental value as he perceives it. many of his core holdings were acquired at silly prices in the 72-74 bear market and he's watched some of them rise over 100x.
 

chump

Senior member
2,212 274
Rain,
My question was really hypothetical. I knew a bit about how Buffet works. The question was really to invite other people to ask how does this help them (if at all) to trade.

Buffet clearly tries to buy at average lower price,but due to his long time frame that makes it difficult to use him o his strategy has a 'shadow' to follow.

What he does has little relevance to people who have a radically different timeframe.

Cheers
 

Rainmaker

Active member
201 3
chump

agree - that was my point. he certainly is not a trader. also useful to remember that he uses the excess capital churned out by his insurance companies to invest (not something that you or i could replicate!). and his biggest core holdings date back 30 years.
 

nomish

Junior member
42 0
there on many books about buffet and i think we could easily say that everyone who deals with stocks knows he is a long-term investor.

but is there anyone here following his stratergy?

and does anyone know when buffet made his first million then billion? (i'm interested just to see the timescale as he started around the age of 14 on a very small scale)
 

Rainmaker

Active member
201 3
his original investment partnership started in omaha in 1952. he was funded by friends, family and neighbours - they set up a limited investment partnership (a form very similar to a US hedge fund!). the company that became berskhire hathaway was set up in the late 60's. i think the quoted annual return (including capital returned) on buffett's funds is about 26%.
 

The Baptist

Established member
715 45
What do we read from it?

For starters I read the following:

If some one who is a stringent adherent to the value investment doctrine of Graham is saying that there are few opportunities in the US, it means a large section of the investment fund industry (value Funds) should be finding the same and building cash not equity positions.

As I believe the closest thing we have to a line of truth in terms of prices is based on Value and the accepted Net Present Value expectations from a stream of earnings, actual prices oscilate around this line depending on sentiment and other demographic distortions (like Baby Boomers of the last 15 year bull run, (now starting to retire!)). The further flung they get from this line the more violent the shocks. It used to be accepted that mature industries averaged 15PE's Nasdaq ave is in the 90's, surely there are more boo.com's and Enrons than eBays (a genuine new idea which introduced a truly new realm of trade and microindustries) in this group.

Where previously we may have had forgiveness in entering positions with the bull run always insuring good exits, I believe we may have a market more prown to downside shocks than upside one's at least at an indices level.

This means maybe we should have preset stop profit targets for any entry and avoid a vague exit plan which is ad hoc dependant on market development once already in the market.

Tight stops and entry's involving high momentum breakouts (when going long) which confim the set up almost immediately with quicker exits if the pattern does not develop as planned.

A greater predisposition to developing and entering shorting strategies and inhanced liquidity to ride out the higher volatility that are associated with rapid falls. Volatility based trading strategies that could utilise options.

These are just an off the top of my head assessment in terms of what potentially might be assesed as relevant in a market where the smart value based long term investor, who usually buffers volatility in big corrections by buying, is now sitting on his hands.

Further to which Buffets view on the dollar and desire to europeanise his currency exposure further provides a host of possible repercussions if US investors see his move as acceptable as opposed to unpatriotic and start giving preference or even just a higher priority to foreign stocks and currencies over domestic. Hey its Ok to dump Fords and buy Euro and Jap cars what next ....dumping Coke for Nokia.

IF US buyers bought european and the dollar remained weak we might even see a period of non correlated EU indices to US indices this could make for interesting equity spreads neutral equities Long EU/UK short US stocks. The possibilities of a Bell wether opinion maker Like WB are actually endless. I am not a journalist trying to grab headlines by prodicting pure meltdown while a possibility, I do think Volatility and downside with sideways congestion all may become more prolific.

I see the article as having possibly endless repurcussions in varying degrees of influence.

It may help those who like a prevailing Fundamental undertone to bias the emphasis of the trading, say more spec on the long side than position etc..

Enjoy building the macro model of outcomes and happy trading off of it. But don't ignore this development.

TB
 

The Baptist

Established member
715 45
Buffet the trader.

Quote from Motley fool article:

'And as I noted in an Aug. 2003 article, Buffett's ability to "trade" is phenomenal. Earlier this year, he disclosed that he had -- for the first time -- taken a currency position speculating in the drop of the U.S. dollar. Berkshire's earnings on this trade in 2003 exceeded $800 million. He also manages a trading account where he generated a gain of $379 million from opportunistic investments in fixed-income strategies.

These aren't the only places where Buffett deploys capital, but between the two he accounted for $1.17 billion in earnings by himself. Once again, he suggests that we shouldn't expect these results in the future. We'll just see about that.'
 
 
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