This Buffett Investment Is Brilliant. (Hint: It’s Not Apple, Chubb, nor Occidental Petroleum)

This Buffett Investment Is Brilliant. (Hint: It’s Not Apple, Chubb, nor Occidental Petroleum)

In recent weeks, companies have published their results for the first quarter of 2024. Taking into account both the S&P500 And Nasdaq Composite reached record levels, investors were keen to assess the evolution of the market’s hottest themes. Artificial intelligence (AI), revolutionary new drugs in the pharmaceutical industry, and a booming energy sector are all fueling purchasing activity in the market.

It’s easy to get lost in the euphoria and hype currently driving the market. However, I encourage investors to take a step back and look at what others on Wall Street are doing.

Warren Buffett’s portfolio is often a good starting point. Since 1965, Buffett’s Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) reported 4,384,748%. At the end of the first quarter, Berkshire held $189 billion in cash and equivalents in its assets. balance sheet. With so much capital at his disposal and favorable stock market conditions, where could Buffett look for value?

As usual, the Oracle of Omaha left some clues in his latest letter to shareholders. Let’s explore where Buffett invests his money aggressively and evaluate why it might be a good strategy for you too.

Buffett made big moves in the first quarter

Buffett is a rare breed. His long-term success, coupled with his seemingly simple strategy, has earned him the admiration of investors around the world. When Buffett buys or sells a stock, his actions have the power to significantly shake up the market.

During the first quarter, Buffett made some notable changes to his portfolio. To begin with, he reduced his stake in Apple by almost 13%. Although Apple remains Berkshire’s largest holding by far, the sale caused some initial shock.

Besides Apple, Buffett also sold stocks in SiriusXM, Primordial, Louisiana-PacificAnd Chevron. Buffett added to a single existing position: Western oil. Plus, he finally revealed a new position at an insurance company Chub.

This Buffett Investment Is Brilliant. (Hint: It’s Not Apple, Chubb, nor Occidental Petroleum)

Image source: The Motley Fool.

All things considered, I’d say most of Buffett’s actions during the first quarter were pretty mundane. But the cash pile is interesting.

There is one investment in particular that Buffett seems to favor

At the end of the first quarter, Berkshire had $35.5 billion in cash on its balance sheet. Additionally, the company also had $153 billion in short-term investments.

What exactly does this mean?

BRK.B Short Term Investment Chart (Quarterly)BRK.B Short Term Investment Chart (Quarterly)

BRK.B Short Term Investment Chart (Quarterly)

In short, Buffett buys Treasuries. Given the strength of the stock market across different sectors, this decision may seem confusing. However, in Berkshire’s first quarter report, management said: “We continue to believe that maintaining sufficient liquidity is paramount and we emphasize safety over yield when it comes to short-term investments.” »

Remember, Buffett is a contrarian investor. Of course, markets are showing real strength right now, but inflation has remained stubbornly high, adding another level of complexity when assessing the state of the economy. Despite several growth opportunities available today, Buffett is not known for chasing tailwinds or chasing high valuations.

As always, Buffett plays the long game, and his decision to buy Treasuries is a classic part of his overall strategy.

3-Month Treasury Bill Rate Chart3-Month Treasury Bill Rate Chart

3-Month Treasury Bill Rate Chart

Considering that the current three-month Treasury bill rate of 5.3% is the highest in almost 20 years, combined with support from the U.S. government, investing cash in these bonds sounds great.

With so much unpredictability surrounding the macroeconomy, I think Buffett’s choice to roll over Treasuries every 90 days is wise. While there are plenty of opportunities to experience lucrative growth, many stocks and sectors still remain highly volatile at this time. Additionally, I don’t see market volatility easing anytime soon. For these reasons, I wouldn’t be surprised to see Buffett continue to double down on his Treasury investments for the time being.

If you’re an investor looking for a stable, reliable way to bolster your cash flow, then following Buffett’s lead in the Treasury bond market might just be for you.

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Adam Spatacco has positions at Apple. The Motley Fool holds positions and recommends Apple, Berkshire Hathaway and Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

This Buffett investment is brilliant. (Hint: It’s not Apple, Chubb or Occidental Petroleum) was originally published by The Motley Fool

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