Warren Buffett has done it in the past few days: he bought shares. With its holding company Berkshire Hathaway (WKN: A0YJQ2) he was initially on a shopping spree in the area of infrastructure and energy. Before he has been with the Bank of America has struck. His second largest position in advance.
Every now and then it was also purchases and the withdrawal of own shares that were reported. However, this corporate action has a certain regularity. Accordingly, investors should not overestimate that. It is striking that the purchase price was about three times the previous quarter.
For many investors, now that Warren Buffett is buying shares, there is an exciting question: Does that mean that the stock markets tend to go up or down? An interesting question, to which we can answer rather evasively. However, looking at Warren Buffett’s approach should help.
When does Warren Buffett buy stocks?
Warren Buffett naturally buys stocks in the long term with the intention of increasing their value. Or generate returns in some other way. It would of course be negligent to invest for other reasons. However, buying because stocks go up is not his approach.
No, Warren Buffett invests in a company-oriented manner. That means he invests whenever he sees a company that he likes. This also implies that he looks at the valuation and draws his individual conclusions about the return potential. Unfortunately, that also means: For the broad market, we can hardly say whether Warren Buffett is now optimistic. Or pessimistic.
The bottom line is that Warren Buffett is now investing: He seems to think Bank of America’s stock at the current level is reasonably attractive, which is why he put around $ 1.2 billion in the stock. In addition, the Omaha oracle seems to believe that it can generate a return on the infrastructure assets previously owned by Dominion Energy. And that buybacks of own shares can generate added value for investors in the long term. These are possible individual conclusions that can now be drawn.
Warren Buffett is not concerned with this question
We should also keep in mind that Warren Buffett doesn’t care whether the markets go up or down. This, of course, makes it difficult to answer the question of whether his purchases are a positive signal for the broad markets. Or not. However, this can be an instructive example for you as a Foolisher investor.
In any case, Warren Buffett now considers at least some stocks to be attractively valued. In view of the high valuation of the DAX, S&P 500 and Co., being selective can be very important. Furthermore, the procedure of the Oracle of Omaha is known when the stock exchanges correct it: After all, he likes to buy his valued quality at an affordable price. Should the markets therefore collapse without a fundamental reason for it, it does not seem to be out of the question that he will hit his favorite shares again.
All of this happens knowing that a large portion of its investments will generate solid returns in the long run. And continue to increase in value. This is exactly the focus that you should also have as a Foolisher investor.
Are exchanges rising or falling? The wrong question!
It would be a fallacy to derive a specific direction for rising or falling stock exchanges from Warren Buffett’s current actions. In any case, one thing is certain: The Oracle of Omaha has bought. The star investor therefore appears to be optimistic about certain stocks.
But not in terms of short-term potential. No, but over many years and decades. And that is what really matters in the long term.
The post Warren Buffett is now buying stocks: does that mean the stock markets tend to go up or down? appeared first on The Motley Fool Germany.
Vincent owns Berkshire Hathaway shares. The Motley Fool owns and recommends shares of Berkshire Hathaway (B shares) and recommends the following options: Short September 2020 $ 200 call on Berkshire Hathaway (B-Aktien), Short January 2021 $ 200 put on Berkshire Hathaway (B shares) and Long January 2021 call $ 200 Berkshire Hathaway (B-Aktien).
Motley Fool Deutschland 2020