If you are a true investing enthusiast you have not missed the first ever ‘digital only‘ annual shareholders meeting of Warren Buffett on Saturday May 2nd, 2020. If you, like me, live in The Netherlands it was almost an allnighter (start time 22.45PM with the meeting taking about 5 hours). I was really surprised about what Buffett had to say… Why didn’t Warren Buffett buy any stocks during the market crash?
Buffett didn’t buy a single stock!
Never bet against America
The meeting first started with a rather boring history lesson (1 hour) of how the United States was founded and how well it performed with only a couple of hundred years of existence. Never bet against America, etc.
Afterwards, he explained about whether Berkshire Hathaway (ticker: BRK.B) has been buying stocks or not in Q1 2020. He had not. Buffett even showed April on a slide with not even a single stock purchase.
Imagine that… Stocks crashing 40-50% and in his view there were still no bargains to be found.
I was like WHAT?!
I’ve been buying Berkshire in March and April
The reason for my surprise was that I’ve been waiting for Berkshire to drop in price significantly for the past year or so. I also mentioned that in my previous post. I thought now was the time to buy Berskhire with my view that Berkshire will perform better in a bear market.
Starting to buy shares at about USD 198 per share I pretty much averaged down to about 160 per share.
With a USD 130 billion cash position held by Berkshire Hathaway I was effectively hedging my downside risk and still be long in stocks.
I do not consider myself a great stock picker, so I thought let’s give my money to Buffett to work his magic for me and buy great companies at a discount.
I became somewhat anxious when Jason Zweig interviewed Charlie Munger (Buffett’s right hand). He said that the ‘phone was not ringing off the hooks‘. Indicating no interest from companies in Berkshire’s liquidity. Which made sense because the Fed was pretty much giving away free money.
Munger also mentioned that the primary objective of Berkshire was to preserve the capital of investors that had put 80-90% of their net worth into Berkshire.
This all makes sense, but what about a 30 year old like myself that still needs his nest egg to grow and grow?
Why has Warren Buffett not bought any stocks during the corona market crash?
So why has Buffett not bought any stocks during this market crash? His answer was relatively simple:
I would say the range, the probabilities, or possibilities, and on the economic side are still extraordinarily wide. We do not know exactly what happens when you voluntarily shut down a substantial portion of your societyWarren Buffett at the BH Annual Meeting
Het also mentioned that because of the wide range of possibilities he currently doesn’t like stocks more now (at the time of May 2nd) than pre-Corona.
With hindsight we know that (at least until now) he has missed out on a large opportunity taking into consideration the quick recovery. You cannot blame him. He stuck to his main principle: never lose any money!
Although, Berkshire Hathaway is still a great company and still not expensively valued… I’ve sold all my Berhshire Hathaway holdings…
I’ve sold all my Berkshire Hathaway stock on Monday May 4th
In my view, although the range of possible outcomes were and are still very wide, I’m willing to take my chances with a certain amount of capital.
Unfortunately, I’m not yet in the capital preservation phase. I still need decent growth overtime. I was expecting to get just that with Buffett investing his massive USD 130 billion cash pile during this market crash. However, I was wrong.
To summarize, with no stock purchases by Berkshire during this crash and low chances, as admitted by Buffett himself, of Berkshire consistently beating the S&P 500 index in the long-run, I’ve changed my mind.
That’s why I’ve sold all my Berkshire Hathaway stock and put everything into ETFs.
I have bought the following 3 ETFs
- Vanguard FTSE All-World UCITS ETF (45%)
- Xtrackers S&P 500 Equal Weight UCITS ETF (45%)
- VanEck Vectors Global Real Estate UCITS ETF (10%)
I’m highly convinced that this portfolio mix will provide me with bumpy but steady returns. It matches my long-term investing style. It helps me to live my life without the need to go through annual reports or feel any pressure to find the next Google or Facebook.
But still, it’s my personal opinion and risk tolerance. That will be different for anyone.
So please, don’t just copy this portfolio and blame me if it doesn’t work out the way you thought it would 🙂 Everything at your own risk.
It’s a pretty straight forward portfolio. The only outlier is the equal weight S&P 500 index.
As the name suggests, it invests all funds equally among the S&P 500 constituents. I will write a separate post of the significant benefits I see from this ETF compared to the traditional ‘market-cap weighted’ S&P 500 index.