Warren Buffett is Buying in the Face of an Uncertain Future
The Oracle of Omaha’s latest moves have a lot of investors scratching their heads.
Berkshire Hathaway – home of famed investor Warren Buffet – announced several large changes to its portfolio this week.
Among the moves in the latest quarter are new purchases of Chevron Corporation (CVX), AbbVie Inc (NYSE: ABBV), Bristol-Myers Squibb Company (NYSE: BMY), Merck & Co, Inc (NYSE: MRK), T-Mobile US, Inc (NASDAQ: TMUS)
Buffett also added 146.7 million shares of Verizon Communications Inc (NYSE: VZ) while cutting Berkshires’ holdings of Apple Inc. (AAPL) by 6%.
And while a huge investment firm buying and selling stocks is hardly newsworthy, some that have followed the legendary career of Warren Buffett are questioning why he would want to significantly add to his portfolio right now.
Where’s the money?
If you’re not a longtime Buffett disciple, you may not know about the “Buffett indicator” – which is a measure of how stock valuations stack up against the current GDP. By dividing the Wilshire 5000 Index by the annual U.S. GDP, one can determine if stocks are overvalued or undervalued.
And looking at the current state of this indicator should set off alarm bells. Right now, the Buffett Indicator stands at over 225%, signaling that stocks are highly overvalued.
For some perspective, the indicator hasn’t been this high since the Dotcom Bubble of the early 2000s – which saw the Nasdaq drop more than 76% and dragged a number of blue-chip stocks down with it.
It’s still unclear why Buffett would be looking to add to his portfolio, seemingly against his own indicator.
While many will be tempted to follow the lead of perhaps the most successful investor in modern history, I would advise caution here.
This is what’s giving me pause…
How do I get some?
Whenever Warren Buffet makes a move, people listen.
That’s why Chevron Corporation (CVX) and Verizon Communications Inc (NYSE: VZ) and several others that were bought up by Berkshire are up today while the broader stock market is down.
With that said, I would be very careful of buying this strength.
As I told Project 303 subscribers last month, the January Barometer is one of the most historically accurate indicators.
Basically, it says that as January goes, so goes the rest of the year. And with the market moving sharply down at the end of January, combined with the alarming state of the Buffett Indicator, investors should be wary.
Personally, I’m going to be very careful and stick to this one rule…
The Only Indicator You Need to Profit
Look, there’s no crystal ball when it comes to Wall Street.
Could we see a big market correction like the Buffett Indicator and the January Barometer seem to be suggesting?
But we could also see the throng of new traders entering the market continue to drive valuations up.
If you’re looking to make money with short-term trading, the only thing you need to concern yourself with is the supply and demand curve. All the indicators and barometers in the world don’t mean a thing. If traders are buying, the price will go up.
And my S.C.A.N. system is fine-tuned to help me identify where the most aggressive buying is taking place. And that’s exactly where I alert my Project 303 subscribers to strike for the chance to double their money, sometimes in just a matter of days.
Click here to learn how Project 303 can show you some of the best profit opportunities, no matter how volatile the market.
In the Spotlight: Antitrust Scrutiny Turns to Slack
Shares of Slack Technologies (WORK) took a hit yesterday after reports surfaced that the Department of Justice (DOJ) is making inquiries into the proposed acquisition by salesforce.com, inc. (CRM).
Its is still unclear what exactly the Antitrust Division of the DOJ is seeking, but the investigation is putting pressure to sell on Slack shareholders that are awaiting closure of the deal with salesforce.
Demand for digital communications tools remains high, and the pending deal is expected to help salesforce compete with Microsoft Teams for market share. I’ll be keeping a sharp eye on this situation and will keep you updated as pertinent details emerge.