In today’s Money Morning … a great buyer of great technology … more opportunities …don’t get carried away with all the inflation and fixing of interest rates … and much more …
It seems that the Oracle of Omaha, Warren Buffett, justifies his opposing ideals.
Both the Fed and the RBA have risen sharply this week – decisions that have been made for a long time in terms of market expectations.
This was not the case if Raising rates were supposed to happen, however if.
That is why we are seeing such volatility for most of 2022. Markets have tried to determine and price in these policy shifts.
In particular, for U.S. tech stocks, as we saw last week, this was a problem. Investors are clearly worried about how these changes will affect current growth. So if the set of quarterly results didn’t impress, we saw billions destroyed by fleeing traders.
But not Buffett …
Reports from his investment firm, Berkshire Hathaway, show he was shopping. Nearly a third of the company’s $ 147 billion cash reserves were finally launched as Buffett allocated approximately $ 41 billion per share.
And perhaps the biggest shock is that it buys a lot of technology. This is a sign that clearly indicates that Buffett and his company believe that at the moment you can find many deals.
A big buyer of great technology
It’s no secret that Buffett is a big fan of Apple. After all, stocks were one of his best decisions in terms of return on investment. To this day, 40% of his firm’s total portfolio still consists of AAPL shares.
But now the company is firmly trading with a market capitalization of $ 2.69 trillion, it’s hard to imagine that there will be much more growth ahead. However, this did not stop Berkshire: Buffett confirmed that he had recently bought another $ 600 million in AAPL shares.
The funny thing is that he wanted to keep buying, but had to stop. In his own words:
‘Unfortunately, the stock rose again, so I stopped. Otherwise who knows how much we would buy?‘
Obviously, Buffett believes that he received these shares for a profitable deal. Here is the essence of his approach to investing.
His attention was also drawn not only to the AAPL. It is also geared towards game developer Activision Blizzard, seeking to buy stocks at market prices lower than the proposed bid as a result of Microsoft’s recent takeover. This is a relatively simple way to potentially make a decent profit.
As a result, Berkshire is now probably the company’s largest shareholder with a stake of 9.5%.
Then there was the purchase of 121 million shares of HP last month – a deal worth 4.2 billion US dollars, as a result of which Buffett became a key investor in the manufacturer of PCs and printing equipment. Again, this move seems motivated by an understanding of the “deep value” of stocks rather than speculative growth.
And this, dear reader, is a key point to remember.
Despite the fact that technology belongs to high marks and rampant speculation, you can find value.
There will be more opportunities
Now, although Buffett’s moves are interesting, that doesn’t mean you have to copy him either.
The big reason for his success and strategy is the huge capital he controls. If you’re trading billions of dollars, finding ways to invest in stocks without undermining the value of stocks can be difficult.
But if he could, Buffett would delve into much smaller companies. So he eventually made a name for himself in the first place. As he admitted back in 1999, when the dot-com boom unfolded:
‘If I had $ 1 million today, or $ 10 million, I would be fully invested … It’s a huge structural advantage if I don’t have a lot of money … A universe I can’t play in has become more attractive than the universe I can play. I need to look for elephants. It may be that elephants are not as attractive as mosquitoes. But this is the universe I have to live in.‘
Never forget this fact because it is your biggest advantage over big traders such as Buffett.
You can and should look for bigger opportunities in smaller companies. Not only because they have the potential for greater growth than established stocks, but also because they are often ignored by much of the market.
Big money only starts to come when these companies make a name for themselves like Apple, Activision or Amazon.
After all, back in 1999, when Buffett made his remark about “mosquitoes” in the investment world, Apple, Activision and Amazon were just that. These were the little caps of the past that have become the grand profits we know today.
So don’t get carried away with all the inflation and fixing interest rates. Because while this is still a factor to consider, it does not detract from the tremendous advances that can be found in technology.
Editor, Morning money
Ryan is also the co-editor Exponential stock investor, a stock newsletter that tracks promising stocks with low capitalization. For information on how to subscribe and see what Ryan is telling subscribers right now, Click here.