Buffy the Investment Slayer

Warren Buffett has arguably the best investment record of all time. He earned an annual return of 20.6% over 53 years, double the 9.6% annual returns of the S&P 500… A feat that only a handful of people have ever accomplished. He manages ~$200b in his investment company, Berkshire Hathaway ($BRK.B).

It’s not easy being Buffy

If you think 2020 has been a bad year for you, Warren’s investment returns took a steep dive and lost ~$50b in the first quarter of 2020. In the current year, Berkshire’s stock, a good representation of Warren’s portfolio, is down ~9% while the S&P 500 is up ~4%.

Unlike the rest of us, Warren’s average investment size is in the billions. With a portfolio worth ~$200b, each of his investments must meet a minimum size to make an impact on his returns. This crosses out many of the high growth but smaller companies and reduces his investment options, making it difficult to select the best-performing stocks.

Learning from Buffy

The investment community analyzes every piece of information found on the investment slayer. This includes his investment decisions, interviews, and even his dietary preferences – Coca-Cola and McDonald’s cheese biscuit. Over the last 3 months, Warren made two noticeable moves that caught everyone’s attention:

For the first time in history, Warren made his first investment in a gold company, Barrick Gold ($GOLD).

• Meaning… Warren’s investment in gold is particularly interesting because he trashed gold as an investment numerous times over the past decade. So why the sudden change of heart? It’s a guessing game to everyone but high inflation and risks of a global economic crisis could be two potential reasons.

(TAJ: Everything you need to know about gold as an investment and why inflation is bad?)

Warren sold all his stock in Goldman Sachs, reduced his position in JPMorgan Chase, and bought more Bank of America stock.

• Meaning… Even after dumping a large portion of his bank stocks, Berkshire holds ~7% of its portfolio in banks worth $56b. Why sell certain bank stocks only to purchase more? Analysts are seeing his trade as an opportunity to sell off riskier banks while buying stronger ones.

Stay on alert: The common theme reflected in Warren’s purchases is a lack of confidence in the global economy.