The COVID-19 Crash Proved Warren Buffett Is an Atypical Investor

Warren Buffett-led Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) kept its cash hoard intact in the latest COVID-19 market crash.

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Berkshire Hathaway’s annual meeting is indeed one of the greatest events in the global investment community. This time the meeting was even more remarkable, as market watchers were eagerly waiting to know how the legendary investor Warren Buffett played out during the COVID-19 market crash. However, he yet again proved that he is still a patient investor and would not compromise on his investing ethos.

Berkshire Hathaway’s cash pile at the end of the first quarter stood at $137 billion, swelling from $128 billion in the Q4 2019. Warren Buffett largely maintained the cash hoard even when the S&P 500 fell almost 35%, far deep in the correction territory during the COVID-19 crash.

Berkshire Hathaway’s cash pile grows further  

The Oracle of Omaha has been looking for attractive opportunities for the last several years. This market crash gave an excellent opportunity for investors, including Warrant Buffett to buy stocks at a large discount. However, his staying put even when the company’s cash is swelling is a treasured lesson for market participants.

It is quite strange that one of the greatest investors of our times was the net seller during the COVID-19 crash in the first quarter. He bought equities worth $1.8 billion and sold around $6.1 billion worth of shares in this period. Interestingly, Warren Buffett stated that he’s still short of any worthy investment ideas.

He might be expecting markets to fall further and the overall picture to turn gloomier going forward. Notably, stocks had been rallying for more than a decade until early 2020. It’s not completely unreasonable if he is expecting a more brutal selloff after such a long, epic bull rally.

Apart from his bearishness, the huge cash pile could also act as a cushion to Buffett’s successor in case of an economic downturn.

Warren Buffett on airline stocks

Warren Buffett sold all of Berkshire Hathaway’s stakes in airline companies in the last quarter. It held an almost 10% stake in all big four airline companies in the U.S. In Berkshire Hathaway’s annual meeting this weekend, Warren Buffett admitted having made a mistake by betting big on airlines.

That might have disappointed a lot of Air Canada investors. Many pundits were expecting Buffett to turn to Canada’s biggest airline company, Air Canada, when the stock fell to its multi-year lows in March. However, he expects airline business to change in a meaningful way post-COVID-19 crisis. Warren Buffett’s comments notably paint a bleaker picture for airline companies including Air Canada.

Warren Buffett led-Berkshire Hathaway reported a record $50 billion of net loss in the first quarter. However, these losses look magnified mainly due to the accounting rules with which companies have to report unrealized losses. These losses might eventually come down as stock prices of Berkshire’s holdings recover.

The shares of the conglomerate have notably underperformed the broad market index recently. Berkshire shares have lost around 20% while the S&P 500 has fallen 12% so far this year.

As of December 2019, Berkshire Hathaway holds 15 million shares of Canadian energy giant Suncor Energy and 8.4 million shares of Restaurant Brands International.

Both were some of the biggest losers among TSX stocks during the COVID-19 crash in March. Whether he added these two Canadian giants during the latest correction remains to be seen.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares).

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