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ยท Posted on
May 20, 2022

Warren Buffett's Berkshire Hathaway is on one hell of a shopping spree, as other investors close their purses

Apple is on Berkshire Hathaway's shopping list, along with a bunch of other companies.

What's the key learning?

  • Value stocks are companies that are trading at a lower price than their fundamentals would suggest.
  • Value investors like Berkshire Hathaway swoop in to buy shares in these companies for what they consider a bargain price.

๐Ÿ‘‰ Background: Berkshire Hathaway is a US multinational conglomerate run by 91-year-old Warren Buffett and 98-year-old Charlie Munger. The conglomerate started in the early 60s and now manages over $330 billion USD.

๐Ÿ‘‰ What happened: Berkshire Hathaway has holdings in tonnes of big name companies like Apple and Coca Cola, but the company's been under significant pressure in recent years for sitting on a bunch of cash... and not doing much with it.

๐Ÿ‘‰ What else: Now, The Oracle of Omaha's finally making moves. Berkshire Hathaway has spent around US$6 billion since the start of the year. It's all part of Berkshire's value investing strategy which seems to be paying off ๐Ÿ’ธ.

๐Ÿ”” What's the key learning?

๐Ÿ’ก Value stocks are companies that are trading at a price point lower than their fundamentals would suggest. In other words, the share price doesn't reflect the company's dividends, earnings or sales.

๐Ÿ’ก In some cases, the company may even be trading less than its intrinsic value (i.e. its market cap is less than the value of all its assets). This happens because, well, investors ain't that rational.

๐Ÿ’กFundamentals aren't the only thing investors look at. Sometimes, a company just isn't sexy enough. But value investors like Berkshire Hathaway don't mind, so they swoop in. And it works. Berkshire's stocks are up around 4% - while the S&P 500 is down around 15%.

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