Buffett Jumps Into the Action
The big dogs are buying! Berkshire Hathaway and the Invstr community see something in Dominion. It’s a natural gas supplier; a 95% bullish rating on Fantasy Finance, and the target of Warren Buffett’s biggest asset acquisition of the crisis so far!
Uncle Warren parted with $4 billion in cash and assumed $6 billion in Dominion debt, making the overall deal worth $10 billion. This isn’t the “elephant deal” that investors have been waiting for, but insurance companies like Berkshire are required to hold huge cash reserves, making the $4 billion outlay more meaningful. It’s still big cheese!
The Oracle has already signed off on the sale of airlines during the pandemic and now buys into hard assets that store commodities, natural gas in this case. This could mean many different things. It could mean he thinks inflation is coming.
It could be action bias, having not made a big market move in so long, and feeling like he owes investors something for sitting on the sidelines. It could mean he thinks investors’ ethical push away from fossil fuels is undervaluing those stocks.
There’s a whole bunch of investment ‘factors’ out there; styles like growth, value, and momentum. The value investing approach of buying things for less than they’re worth is timeless, but it’s only value investing if it comes from the Omaha region, at Berkshire, by Buffett. Otherwise, it’s just sparkling underperformance. That’s right. Value investing has been a pain trade for twelve years, and while crises like this make for ideal bargain-hunting conditions, Warren Buffett has set a bearish lead so far.
This big piece of weekend business from him will prompt wider bullishness in markets. “We’re ready to go. We’re ready to invest,” said finance professor David Kass from the University of Maryland yesterday. There could be a rotation into less favored energy and finance stocks now, and even into Berkshire Hathaway itself. Expect heavy volume!
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.