Investing, Warren Buffett

Warren Buffett Investment Strategy (2020)

Warren Buffett ETF Strategy

I’ve been wondering: What is the Warren Buffett investment strategy for 2020? With Coronavirus taking its toll on the world, I’m sure the Oracle of Omaha has some insight into how we should be investing.

Buffett has been heavily invested in airlines for the last few years. Now is not a good time to be in the travel industry! I tuned into the latest Berkshire Hathaway Shareholders’ Meeting to get an idea of how Buffett’s stock portfolio would be changing.

This post covers my main takeaways from the first hour and a half of Buffett speaking at the meeting. If you would like to learn more about who Warren Buffett is, check out my last article on the Warren Buffett ETF Strategy 101.

 

A summary of Warren Buffett’s thoughts on Coronavirus

Buffett says he knows nothing about COVID-19 from a biology perspective and mentions that biology was his worst subject in high school. He is learning at the same time as the world and from his friend, Bill Gates.

He says that we will all be learning in the coming months and possibly years. No one knows what all the possibilities are or even the probability. But there is a large range of what could happen on the health side and also the economy.

However, that range has narrowed and we now know we are not getting the best case or the worst case. The virus is still hard to evaluate and at least we now know what we don’t know. But we also don’t know what happens when you voluntarily shut down a substantial part of your economy.

What Buffett says about the stock market:

He thinks that anything can happen in terms of the stock market. Markets can do anything. In the past they’ve gone down 22% and the stock market has even closed down before. Typically these closures are the result of times of war, deaths of presidents, and disasters (both natural and man-made).

Buffett quotes Sam Nunn, former senator and founder of the Nuclear Threat Initiative, “Germs don’t have borders”.

It is hard to factor for something like a pandemic. This is why Buffett reminds us that we never want to use borrowed money to buy investments. And that is how he makes sure Berkshire Hathaway is run.

What Buffett Thinks About the Economic Future of America

He has been convinced of something important even in WW2, the Cuban missile crisis, 9/11, the financial crisis.

Nothing can stop America.

We have faced tougher problems in the past, though nothing quite like this, but America’s magic has prevailed.

‘If you were to pick one time and one place to be born, without knowing your gender/ mental ability/etc. You would pick today and you would pick America…We still have a long way to go in creating an even wealthier and more equitable society. But never, ever bet against America’

-Warren Buffett, at the 2020 Berkshire Hathaway Shareholders Meeting

 

Warren Buffett Investment Strategy #1: American Businesses

A lot of people pay too close of attention to the fluctuation of stocks. Just because they change minute by minute, that doesn’t mean that their long term value has changed an equal amount.

Pay more attention to the overall potential of the equity. You are purchasing based on potential and are buying into the business, not the quoted price. If you like the business, the management, and the business hasn’t fundamentally changed, then it is still worth your trust.

“You will get a fine result if you own equities over a long period of time. They will outperform inflation, they will outperform treasury bills, and they will outperform the money under your mattress.” – Buffett

Warren Buffett Investment Strategy #2: ETF’s!

Warren Buffett’s career is based on active investing. This is when you are actively choosing which stocks you would like to purchase as opposed to simply investing in an index fund or mutual fund.

For the first time in 2020, Buffett has started to invest in ETF’s. The two ETF’s that Berkshire Hathaway, Buffett’s company, invested in are VOO and SPY. These both track the S&P 500 index, which is the same as investing in the top 500 publicly traded US companies.

“In my view, for most people, the best thing to do is own the S&P 500 index fund. People will try to sell you other things because there is more money in it for them if you do…”, says Buffett.

I recently wrote this post about the Warren Buffett ETF strategy that further explains his thoughts on ETFs.

Berkshire does something similar to this strategy but on a larger scale. It buys businesses and it buys parts of businesses. Instead of buying the S&P500, they like to buy the actual businesses or partial interests in a company. That way they can own 6-8% and regard it as a partnership interest in that organization.

Buffet hopes that people consider purchasing stocks as buying into a partnership with the business and not just chips to move around.

 

Warren Buffett Investment Strategy #3: Drop the dead weight

Uninvesting in Airlines

Coronavirus hit, the world changed, and Berkshire Hathaway dumped all of its airline stocks.

For the last several years, Buffett’s company was investing heavily in airlines. That impressive portfolio includes the big names of American Airlines, Delta Airlines, Southwest Airlines, and United Airlines.

And as of 2020, it has reduced its investments in airlines to nothing. Zero. Nada. Zilch. This likely is a result of the Warren Buffett investment strategy of owning stocks that you believe in the long term.

Though it is unlikely that airlines are gone for good, it is very likely that it will take them around at least 5 years to recover from Coronavirus. And that’s assuming that there isn’t a second wave that doesn’t extend lockdowns into 2021.

Looking at the aerospace industry long term, it seems that profits will not be had there any time soon. That fact plus the clear volatility in this industry has made these businesses too risky of a long term investment.

Selling off Goldman Sachs Investment

Berkshire Hathaway sold over 10 million of its shares in Goldman Sachs during the first quarter of 2020! This equals a 2.9% share of the investment bank as a whole, aka $2.3 Billion, and 84% of Berkshire’s stake in the company.

Goldman Sachs stocks have been held by Berkshire Hathaway since the 2008 financial crisis in a bailout purchase that cost over $5 Billion. As a result, Goldman’s was paying Berkshire an annual dividend of $500 million!

Warren Buffett Investment Strategy #4: Don’t be afraid to sit on cash

After the first quarter of 2020, Berkshire reported that they had a record amount of cash on hand. A total of $137.3 billion to be exact!

This goes back to Buffett’s strategy of investing in companies that you believe in the long term value of. And if you don’t see a good deal, that doesn’t mean waste your money on the next best thing! Don’t be afraid to wait for the right opportunity.

After all, good things come to those who wait.

 

Disclosures and Disclaimers: The above references an opinion and is for entertainment purposes only. It is not intended to be investment or insurance advice. Seek a duly licensed professional for your financial planning. Bear in mind that some of the links in this post are ads/affiliate links and if you go through them to make a purchase I will earn a commission (thanks!). Keep in mind that I link these companies and their products because of their quality and not because of the commission I receive from your purchases. The decision is yours, and whether or not you decide to buy something is completely up to you.

Kathryn Rucker is a sales consultant and content writer. With 7+ years of sales experience, she is passionate about helping businesses and individuals grow their sales pipelines by improving their online presence.

She has been traveling full-time since 2018 thanks to the location and financial independence she has gained from her business, Rucker Sales Consulting. You can connect with her on Linkedin!

Kathryn Rucker is a sales consultant and content writer. With 7+ years of sales experience, she is passionate about helping businesses and individuals grow their sales pipelines by improving their online presence.

She has been traveling full-time since 2018 thanks to the location and financial independence she has gained from her business, Rucker Sales Consulting. You can connect with her on Linkedin!

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5 thoughts on “Warren Buffett Investment Strategy (2020)

  1. Wow! This is the first post I’ve read from your blog and I’m definitely hooked. I think that one of the best things that we can do in the personal finance community is learn to listen! Somebody like Warren Buffett will have far more wisdom and experience than I could ever dream of. We often let ourselves be seduced by blogging and talking – and need to spend more time listening.

    That said, I’ve never actually paid much attention to the advice of Buffett (though I definitely am aiming to find more now). This post is incredibly informative in terms of both giving us information and making it readable, actionable advice.

    There really is a talent that comes through reading the words of others and distilling it down – and I’m pretty sure you’ve nailed it. I’m definitely joining your email list and I can’t wait to read more form your blog!

    1. Thanks for stopping by! I am so glad you enjoyed the Buffett post! As you said, listening is key. I also tend to be so distracted by blogging and talking that I miss out on learning.

      I really want this blog to be a place where wisdom from multiple sources comes together in an easy to understand way for new investors/savers/travelers! I’d love to have you guest post at some point if that is of interest.

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