Warren Buffett needs no introduction. He’s one of the only investors in history to post annual gains of 20% or more for several decades in a row. If you want to get rich, just follow the master.
The so-called Oracle of Omaha has been acting strange lately. His trades haven’t always matched up with his long-term advice. In one instance, he contradicted himself within months.
If you dig deep, it’s not hard to see why Buffett is acting strangely. His current mentality is the driving force behind his big bet on one stock in particular.
What’s going on?
At the start of the year, Buffett was bullish on the stock market, even as the COVID-19 crisis began. Just look at his airline holdings. In March, just as the virus was picking up steam in North America, Buffett was holding fast.
“I won’t be selling airline stocks,” he told Yahoo on March 13.
The investing guru actually continued to buy airline stocks. That month, he owned 53 million shares of Southwest, 42 million shares of American Airlines, 22 million shares of United Continental, and 72 million shares of Delta Air Lines.
Based on his bullishness, many investors piled into Canadian carriers like Air Canada (TSX:AC). In the previous decade, Air Canada stock rose 50 times in value. New buyers hoped to join the party by buying at a discount.
Months later, the situation changed completely.
On May 4, Buffett revealed that he sold all of his airline stakes. That’s a strange move for an investor known for his long-term approach. Changing his mind in a matter of months shocked the market.
“The world has changed for airlines,” he commented after unloading his multi-billion-dollar stakes.
“It turned out I was wrong,” he added. “I don’t know that three, four years from now people will fly as many passenger miles as they did last year. You’ve got too many planes.”
Buffett is betting on this stock
Buffett is doing strange things. He’s making long-term bets only to change his mind months later. He’s also making more dramatic statements than ever before. Typically, he’s a business-as-usual guy, even when conditions sour.
The most curious move he’s made this year is one he didn’t make: buy significantly more stock. He has added to some positions, but his holding company Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) still sits on a record amount of cash.
Buffett doesn’t seem to be a huge fan of the stock market right now, but he is loving one stock in particular: his own.
The guru recently disclosed that Berkshire repurchased around $7 billion of its own stock last quarter. That’s a small but meaningful chunk of its $150 billion in cash reserves.
Buffett has the firepower to invest in any company on the planet. He can outright acquire any but the largest businesses. Yet he’s turning inward, spending his cash on the company he knows best.
Investors should take note. Buffett isn’t buying stock en masse. He’s only buying one. And even then, he’s not buying huge sums. Buffett seems nervous. Take caution.
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.
The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Delta Air Lines and Southwest Airlines 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 September 2020 $200 calls on Berkshire Hathaway (B shares). Fool contributor Ryan Vanzo has no position in any stocks mentioned.