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Warren Buffett: How to Handle the Current Environment

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Warren Buffett has consistently outperformed the markets, which is why he is so well regarded in the investing universe. Not only has he outperformed the market for decades, but he’s done so handily.

This gives the Oracle of Omaha even more popularity among investors for such strong and consistent earnings. Perhaps the main reason why so many people are interested in what Warren Buffett is doing or saying, though, is because his investment strategy is relatively straightforward.

Plus, not only is it straightforward, but Warren Buffett has done an incredible job over the years to answer questions from investors and explain his reasoning for his investments. That’s why so many people read his letter to shareholders each year in the Berkshire Hathaway annual report.

It’s also why so many people follow Warren Buffett: to have an idea of what he sees ahead and why he’s making the decisions he is.

Following Warren Buffett’s investments

In the past, Warren Buffett’s investments have dominated the headlines. And while there’s still been a tonne of coverage of his investments this year, with everything else that’s gone on in markets and the pandemic, it hasn’t nearly been talked about as much.

Early in the year, when the pandemic hit, investors were keen on what Buffett was doing. The main move that got talked about was Buffett abandoning airlines, as he didn’t see a full recovery in the sector for at least a few years.

That wasn’t all, though. Buffett also made several peculiar investments that raised eyebrows but also signaled that this pandemic is different from anything we’ve seen before.

His investments in Japanese stocks as well as Barrick Gold, one of the largest gold miners in the world, were not normal Warren Buffett investments.

Why Buffett didn’t need to make more moves

As many moves as Warren Buffett has made this year in response to the coronavirus pandemic, one thing that’s particularly interesting is that Warren Buffett didn’t actually do all that much.

All of the stocks he bought or sold came from his stock portfolio. However, Warren Buffett’s core businesses have been unchanged. So, while his equity holdings are changing, his company Berkshire Hathaway is still made up of much of the same wholly owned cash flow-generating businesses.

This is very important to understand, as it’s the biggest and most crucial part of the business. So, while all this buying and selling is what’s caught headlines, the real thing that Buffett has done this year is mostly nothing. He knows his long-term portfolio is generating tonnes of cash, and because he buys high-quality and resilient investments, there’s nothing to worry about.

In fact, because one of the biggest purchases he’s made this year is him buying back record amounts of his own stock, you would say that he sees his own strategy as one of the best.

Foolish takeaway

This year has been dominated by headlines of stocks and investors making incredible gains. However, what doesn’t get talked about is the opportunity for savvy long-term investors like Warren Buffett to improve their portfolios this year and stay committed to the long term.

With more uncertainty on the way, it’s crucial that you stay focused on the long run. This way, you can find all the best investments and don’t have to worry about making any devastating short-term mistakes.

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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 Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) 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 December 2020 $210 calls on Berkshire Hathaway (B shares).

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