Who do you suppose is the best stock-picker in the world? Arguably the answer is Warren Buffett, head of Berkshire Hathaway. The investment publication Motley Fool takes this a step further and says he is widely considered one of the greatest investors ever. And they have statistics that back their opinion.
Since Buffett took hold of Berkshire’s reins in 1965, it has generated compound annual growth of 19.8%. By comparison, during the same time, the S&P 500 had an average annualized return of 10.2% – a huge difference and one that becomes even more glaring when gains are compounded over time.
Buffet’s understanding of the markets and trends have brought him tremendous prestige and influence – not to mention a fortune estimated to be approaching $200 billion. This makes him one of the richest people in the world.
There is an amazing aspect to this beyond the obvious. In large part, his investment philosophy is to buy and hold stocks for the very long term rather than try to time every market turn. In other words, once he purchases a stock, he patiently gives it time to generate profits. He then uses those to purchase additional stock. This strategy sounds simple enough, but everyone who has tried to beat the market has learned that investing is anything but simple.
So he is now, and always has been, a stock guy. But Buffett watchers have noticed a curious change in his strategy in the last few months: He’s been unloading huge chunks of his shares at a feverish pace. Selling includes even those stocks he had suggested he might hold forever – like Apple. Still, according to very recent government filings, in the first and second quarters of 2024 he sold nearly half of his position in Apple – nearly 500 million shares – with most of the selling coming in the second quarter.
Bank On It?
And Apple is not the only stock Buffett has been shedding aggressively. Another one that he is unloading is Bank of America, the second largest U.S. bank. From approximately mid-July through the first week of September, Buffett sold some $7 billion in BofA, with the heaviest part of his selling coming in the last days of this period.
Even after these sales, “Berkshire remains (Bank of America’s) largest shareholder, with a stake of nearly 11%.” Based on the closing price on Sept. 5, that stake was valued at $34.7 billion, according to NASDAQ. Investors will be watching closely to see whether he’ll sell even more of these shares, while also looking for clues as to where Buffett thinks BofA’s shares and the market in general are heading.
Obvious, But Not So Obvious
What was Buffett thinking when he sold more than $7 billion of stock in BofA? That’s a timely question considering that neither he nor Berkshire has offered investors an explanation for this move. A related question is why he also sold so many shares of Apple. By the way, he also sold shares in other companies including Paramount Global, Snowflake, Chevron, Capital One Financial, and Floor & Decor.
It’s clear that Buffett sees a red flag ahead, but specifically what could he be so worried about? An article in Zero Hedge suggests several possibilities. One is a looming recession that could have a major impact on the market. Another is that the Fed may change its policy on interest rates. And still another is that valuations remain excessively high and are, therefore, risky.
The fact Buffett is willing to hold so much cash when inflation is still high emphasizes that he is deeply concerned about something – and he is far from alone. Other market movers and shakers who have alluded to a storm approaching Wall Street are Elon Musk and Jamie Dimon. Ajit Jain, a Berkshire vice chairman who works closely with Buffett, sold $139 billion of his stake in the company – half of his shares.
Motley Fool recently added to that. “A growing list of prolific billionaires -- including Steven Cohen, Andreas Halvorsen, Lee Ainslie, Ken Griffin, Jonathan Soros, David Tepper, and Meta’s own co-founder and CEO Mark Zuckerberg -- have also been cashing out of high-flying stocks.” Other billionaires and very savvy investors also are cashing in their chips and heading for safer ports.
According to MarketWatch, “Hedge funds are now on course to net sell global equities at their fastest pace since March 2022 when markets were shocked by Russia’s invasion of Ukraine.” Hedge funds are often labeled “smart money” due to the vast resources they pour into their investment decisions. Maybe they know something the rest of us don’t, and if so, that may concern the economy.
Same Ol’, Same Ol’
There’s no question the economy is facing serious headwinds, many of which have been in the making for many years. Maybe they are the reason for all the selling. That’s unfortunate because during this time there almost certainly were opportunities to address them, but those were wasted. And in the interim, the political divide in the country has grown much worse. Bottom line: Compromising on important issues has become more difficult than ever.
According to Zero Hedge, “Whatever the reason for the selling, Buffett and Berkshire traders are undoubtedly concerned about something serious” heading to the market.
All news has to be taken with a grain of salt, and that’s more true these days than ever before. In fact, there is some speculation that certain sinister forces are or will soon try to drive the market in the direction that will not only enable them to make huge profits but also serve their political ambitions. And if they have to take some steps that are not exactly kosher in the process, so be it.
For example, with so many advances having been made in AI, those forces might attempt to use this technology to influence the outcome of the upcoming election. AI could be used to help shape foreign and domestic policies and we may never even have an idea who is behind the curtain pulling the strings or for what purpose. In fact, we may be completely unaware that it is even happening. Is it possible this is one of the reasons the smart money has been selling recently?
Lyrics in a song that was popular in WWII are “Don’t believe everything you hear.” They are truly wise and prescient words.
Sources: fool.com; marketwatch.com; nasdaq.com; zerohedge.com
Gerald Harris is a financial and feature writer. Gerald can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.
