So far, 2019 has been a difficult year for value investors. While their more growth-oriented counterparts have enjoyed significant gains, value-minded investors have struggled to find well-priced investment opportunities.
While smaller funds have gone out of business because of this, it’s the larger value investors that especially struggle to find where to put their money. That’s more or less been the story of Warren Buffett over the past year or so.
His company, Berkshire Hathaway (NYSE: BRK.B) reported it’s Q2 results recently, which showed that earnings went up but also that its cash pile has increased to a new record high.
The onshore exchange rate for the currency dropped below renminbi 7 early Monday for the first time since May 2008, falling as much as 1.3% to renminbi 7.0297 per dollar.
The move, which comes days just a few days after U.S. President Donald Trump abruptly escalated trade tensions with Beijing, is expected to make Chinese goods cheaper and boost exports.
According to The Wall Street Journal, Berkshire reported on Saturday that its Q2 net earnings were at $14 billion, up from $12 billion from the same time last year. Operating earnings ended up falling to $6.1 billion in comparison to $6.9 billion, but most significant of all is the fact that the company has been sitting on more money then it’s ever been in the past. Currently, the company has a record $122 billion in cash sitting on hand, up from $114 billion from Q1 2019.
Shareholders of the company have become somewhat critical of Mr. Buffett for not finding more investment opportunities. Instead, the Oracle of Omaha has resorted to doing what he is good at when he thinks markets are overpriced; wait it out.
Many times in his history the famous value investor kept his money out of the markets when he thought the time wasn’t right, only to be vindicated years later when a reversal comes about and companies become dirt cheap to invest in again.
However, some are making the case that current markets conditions are different. Already a number of well known, smaller value investment funds have gone out of business waiting for this “dry spell” to end, while growth-oriented funds have surged during the same time.
Buffett has already begun to pivot a little in his investment philosophy, whether by his own accord or encouraged by someone else at Berkshire, to start investing in tech stocks. He has already bought a significant stake in Apple, breaking a historic tradition he has had of not investing in tech companies that he would say he “doesn’t understand.”
While many are now saying that a market reversal is long overdue and signs of global economic weakness are growing, it’s also possible that we enter a softer, less dramatic reversal where equity prices aren’t as hard hit as they would in a dramatic crash of the likes not seen since 2008. How value investors like Buffett would fare in such a situation is yet to be seen.
Berkshire Hathaway Company Profile
Berkshire Hathaway is a holding company with a wide array of subsidiaries engaged in diverse activities. The firm’s core business segment is insurance, run primarily through Geico, General Re, Berkshire Hathaway Reinsurance Group, and Berkshire Hathaway Primary Group.
The company’s next largest segment includes Burlington Northern Santa Fe (railroad) and Berkshire Hathaway Energy (utilities and energy distributors), followed closely in size and importance by its manufacturing, service, and retailing operations (which includes five of Berkshire’s largest noninsurance pretax earnings generators: Clayton Homes, Iscar/International Metalworking, Lubrizol, Marmon, and Precision Castparts). – Warrior Trading News
