Warren Buffett. ‘Nuff said. Ok, maybe not. Because each time the man does something, the world takes notice, especially if that something is mindboggling to the average person.
Buffett is, of course, the best known and most successful stock investor on the planet. He deals in the hundreds of millions and billions of dollars each time. And his success rate is second to none which, incidentally, tempts wealth seekers to copy his portfolio of stocks. Why do the hard work when you can easily walk in the footsteps of the Oracle of Omaha, right? But more of that later.
So, what’s Buffett been up to lately?
Well, he has just made a few billion dollars in the last few weeks while you and I were struggling to make that extra few dollars to pay our bills.
In his latest filing, which is required by law, with the United States Securities and Exchange Commission (SEC), it was revealed that Buffett’s holding company, Berkshire Hathaway, had been tweaking its portfolio with some surprising new inclusions.
The biggest eyebrow-raising move was Berkshire loading up on a substantial helping of Apple, Inc shares in the fourth quarter last year.
Apple is, given its market capitalisation of USD$711 billion, the most valuable public company in the world.
Buffett had always shied away from technology stocks, but he started to accumulate Apple shares in early 2016, which surprised some observers.
In his latest move, Buffett upped his stake in the iPhone maker from 15.23 million shares (as of 30 September 2016), to 57.36 million shares.
In case you don’t realise how significant the purchase is, it is 1% of Apple’s stocks, worth USD$7.7 billion.
Buffett also seems to have timed the buy perfectly – Apple’s share price has been on the uptrend lately. In fact, it has risen 17% so far this year on Nasdaq.
So, how much has Buffett made from the Apple investment?
About USD$2 billion.
Not bad for someone who doesn’t even own a smartphone.
But this decision to grab more of Apple’s shares may not entirely be to Buffett’s credit.
“Buffett doesn’t deserve all the credit for Berkshire’s investment in Apple,” Fortune says. “In fact, he might deserve little of it.”
The credit, it has been speculated, would belong to “one or both of Buffett’s chief stock-picking lieutenants, Ted Weschler and Todd Combs.”
But even so, with such an enormous sum being involved, Buffett must have also had his hand in it.
Another noteworthy move made by the man who still has his $3 dollar breakfast every morning, is the sale of all his shares in Walmart, the retail chain.
No one knows for sure why he had done so, but the sale involved almost $1 billion worth of shares.
It is perhaps not surprising, given that he had first trimmed his stake in Walmart in 2016, cutting it from 55 million to 40 million shares, a 27% downsizing. The chain’s share price has fallen by some 21% since 2014. It also now faces stiff competition from eCommerce juggernaut, Amazon.
And then there is the big win for Buffett involving one of his favourite stocks, Kraft Heinz, a food company which was born from the merger of Kraft Foods Group and Heinz in 2015.
“Billionaire investor Warren Buffett keeps getting richer,” Marketwatch reported, “as Kraft Heinz Co.’s merger bid for Unilever PLC could be heaping nearly $6 billion onto his pile of money.”
The news saw Kraft Heinz’s stock shoot up to $9.29, or 10.6%, a record high.
The surge in its share price was a result of Kraft Heinz making a bid – a failed one, as it turned out – for Unilever, a consumer staples company.
Analysts, however, expect Kraft Heinz to persist and a successful merger is only a matter of time.
This has brought smiles to Buffett, who holds 616.17 million Kraft shares, or 50.6% of the shares outstanding, according to SEC records. It has also made Buffett the second richest man in the world, after Bill Gates, the founder of Microsoft.
“Buffett’s fortune has risen more in dollar terms –up $7.9 billion– than any other billionaire since Election Day,” Forbes said in December. “With a $73.9 billion net worth, he is now the second richest person in the world behind Microsoft founder Bill Gates, overtaking Spanish billionaire Amancio Ortega by $400 million.”
All we can do is stand in awe and marvel at the unquestioned genius of the man who was recently the subject of a documentary – “Becoming Warren Buffet”.
So, given that his portfolio is on public record, doesn’t it make perfect sense to just copy Buffett, buy what he buys and profit from it?
Well, not so fast.
For one, we know what he has purchased only after several months, when his filing with the SEC becomes public.
“The time lag between when the institution trades and when you become aware of their trades means that you may be late both to buy, when the price is rising, and sell, when the price is falling,” said financial adviser Ryan Kerr of Ottawa’s Astrolabe Financial Group Inc.
In other words, you may be purchasing stocks which your model investor may have already quit and sold by the time you are aware of his purchase.
Second, top investors like Buffet who, incidentally, takes a long-term view of investing, do not move millions and billions like the rest of us purchase our little horde of stocks. They have wider strategic considerations which we are not privy to.
Analysts and financial advisers therefore do not advise copying Buffett because of these, and other, reasons.
What you should do, as what any financial adviser worth his salt would say, is to do your homework, stay away from day trading (or trying to time the market), and take a long-term view of investing.
This is, after all, also what Buffett would advise.