ASK ARORA: BE CAREFUL ABOUT DECEPTIVE BUFFETT STOCK BUYING HEADLINES

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By Nigam Arora & Dr. Natasha Arora

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Warren Buffett is smart money.  It makes sense to pay attention to what Buffett does.  Buffett is the most successful living investor.

We have been receiving two sets of very different emails about the headlines related to Buffett.  The headlines have been that Buffett has been buying stocks.  The first set of members are pointing out that the headlines about Warren Buffett buying stocks are deceptive.  The second set of members are trying to figure out why Buffett is buying stocks in this market environment.

In The Arora Report analysis, the headlines are deceptive.  Let’s look at the numbers.

  • During the second quarter, the net between Berkshire Hathaway’s (BRK.B) buying and selling of securities is a positive $3.8B.  Media headlines are referring to this number.
  • Take a look at the net buying number relative to the cash at the end of the second quarter.  Warren Buffett’s Berkshire Hathaway held cash of $105.4B.  This is a massive amount of cash.
  • Consider the ratio of the $3.8B in net equity purchases to $105.4B in cash.  This is a very small amount in relative terms.
  • The cash at the end of the first quarter was $106.3B.  The cash at the end of the second quarter was $105.4B.  The cash has fallen by only $0.9B.  Take a look at the ratio of $0.9B to $105.4B.  This is again a very small amount.
  • It appears that Warren Buffett wants to take control of oil company Occidental Petroleum (OXY).  Buffett keeps on buying increasing amount of OXY shares.  Since this is part of Buffett’s business, any analysis needs to subtract the amount spent on OXY purchases from net purchases.  The end result is that Buffett has not been making any material purchases that are not part of his business.
  • Buffett’s investment portfolio had a loss of $53B during the quarter.
  • Warren Buffett reported a net loss of $43.8B for the quarter.

Be careful with deceptive headlines.  You always need to dig deeper.

For those who are interested in deeper learning, 41 stocks in Buffett’s portfolio are analyzed in the context of what you should do now in present market conditions in the podcast series titled “Stagflation: Buffett’s Portfolio.”

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Nigam Arora

Nigam Arora

Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.

Dr. Natasha Arora

Dr. Natasha Arora

Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.

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