It’s been a rough start to the year for investors at large tech companies in the United States. Billionaire Cathie Wood’s ARK Innovation fund is down nearly 30%. And famous stock-memes like GameStop and AMC were squashed.
But that’s not causing Berkshire Hathaway’s Warren Buffett to lose sleep.
Banks, energy companies and other stocks rose in January, which is great news for Buffett as the ‘Oracle of Omaha’ invests in many of these companies. And the value stocks (stocks trading at a lower price relative to their fundamentals) are definitely not in vogue.
Berkshire Hathaway shares are up about 3% this year and are close to an all-time high, while Microsoft, Facebook, Amazon, Apple, Netflix, Google and Tesla are deep in the red.
Many of Berkshire’s top investments are financial companies that started the year on the green, including Bank of America, American Express and US Bancorp.
Berkshire’s portfolio also got a boost from Chevron, which is Buffett’s twelfth largest holding. The oil giant’s shares are up 10% in 2022, making it the best performing company on the Dow Jones.
If this continues, Dave Portnoy of media firm Barstool Sports, who has positioned himself as an investment guru to a new generation of traders, will have to swallow his June 2020 tweet: “I’m sure Warren Buffett is a great guy , but when it comes to stocks, it’s over. I am the captain now.”
It is too early to say whether current market trends will hold. But investors focused on value stocks and who proved to be patients are doing very well.
“Buffet is the turtle. investors of value stocks they just drag on,” said John Buckingham, portfolio manager for value equity funds at Kovitz. “Yes, Cathie Woods will have her day. But many see investing as a casino… the key is to be patient and accept volatility.”
Of course, the 91-year-old Buffett’s biggest stake is Apple – which has dropped 5% so far in 2022 – and has only reported strong gains in iPhone sales. Berkshire also even has a small stake in Amazon, which is down 15%. Therefore, the tycoon did not entirely prevent the Nasdaq from collapsing.
But Berkshire doesn’t own shares in Facebook, Netflix or Google. Nor does he invest in Microsoft, due to Buffett’s friendship with the company’s co-founder, Bill Gates. Berkshire has no stake in Tesla but invests in Chinese electric car company BYD.
Berkshire is not just an investment company. It has well-known companies from battery maker Duracell to railroad Burlington Northern to paint seller Benjamin Moore.
However, Berkshire is primarily a financial services company, thanks to the fact that it owns insurance giant Geico and several other companies in the industry.
Berkshire has also benefited from investors flocking to financial stocks on expectations that the Fed will soon start raising interest rates. Berkshire has the largest stake in the Financial Select Sector SPDR fund, which focuses on banks.
“When investors change direction, they buy financial stocks, and Buffett gets his cut,” Buckingham said. “Berkshire is benefiting because the higher interest rates help Buffett’s insurance business.”
All eyes on the BoE and ECB
Speaking of rates, the Fed suggested a hike is coming in March. Investors will be following the January jobs report on Friday for wage growth and inflation data, which could affect future U.S. central bank decisions.
Some central banks have already raised rates to combat rising inflation. The Bank of England, which raised rates from zero in December, is expected to raise them again at its next meeting on Thursday.
Nearly two-thirds of economists polled by Reuters are predicting the central bank will raise rates another quarter of a percentage point to 0.5%.
Many central banks in developed economies are expected to follow suit and start raising rates later this year.
“They will all move gradually if they can. Central banks need not be overly aggressive. It can be systematic,” said Anthony Saglimbene, global market strategist at Ameriprise Financial.
The only likely exception to the rule? The European Central Bank. The ECB also meets on Thursday and is unlikely to raise rates. Your prime rate will likely remain at zero for a long time to come.
ECB President Christine Lagarde is arguably the most pacifist of the world’s top central bank governors. She argued that the ECB is unlikely to raise rates any time in 2022 as the pandemic remains a major economic challenge.
“The ECB will want to give more time before rate hikes,” Saglimbene said. “Growth is slower.”
Saglimbene noted that southern European countries still need super-low rates to boost their economies, while EU powerhouse Germany is being impacted by a slower global trade and manufacturing environment.
*With information from Reuters
This content was originally created in English.
original version
Source: CNN Brasil
I am Sophia william, author of World Stock Market. I have a degree in journalism from the University of Missouri and I have worked as a reporter for several news websites. I have a passion for writing and informing people about the latest news and events happening in the world. I strive to be accurate and unbiased in my reporting, and I hope to provide readers with valuable information that they can use to make informed decisions.
