Three Ways to Win in This Market

An article in MarketWatch says an investment in Berkshire Hathaway “seems to offer investors three ways to win:”

  • “If the stock market goes up, that would be great for the stock,” it says, noting that Berkshire has holdings in business sensitive to the economy (financials and airlines).
  • Even if economic distress resulting from the coronavirus outbreak worsens, “the company has a gigantic cash hoard of $125 billion it can use to snap up investments at bargain basement prices.”
  • “If things don’t get much worse, or much better, but bounce around indefinitely, Buffett can always use some of that cash to buy back Berkshire stock.” The article reports that in his latest letter to shareholders, Buffett noted, “Over time, we want Berkshire’s share count  to go down,” but that “Berkshire will buy back stocks only if…Charlie and believe that it is selling for less than it’s worth.”

But there are “risks and issues with the stock,” the article notes, citing comments from Argus Research analyst Stephen Biggar who explains that Buffett made some “ill-timed bets on the airlines” and holds “a large number of economically sensitive other stocks,” particularly banks. And then there’s the issue of succession, says Biggar: “What happens when he goes? There’s a fair amount of headline risk.”