He waits in the deep mysterious waters of the Midwest, capturing only giant prey that will feed him over many years; large undervalued companies with dependable earnings.
But this year, this legendary whale has been beached. Big bets on struggling financials like Wells Fargo and U.S. Bancorp contributed to a nearly 25% decline in shares of Berkshire Hathaway.
In the past 30 years, there have been only 6 times where Berkshire's share price has been down this much.
Has this 77 year old whale lost his way?
We wouldn’t bank on it. In the year following declines of this magnitude, Buffett went from dormant whale to ferocious killer - posting average returns of more than 120% or more.
Should you trade in his wake?
As of March 31st the following were Buffett’s top holdings, Coca Cola (KO), Wells Fargo (WFC) Proctor & Gamble (PG), American Express (AXP), and Burlington Northern Santa Fe (BNI).
I think Burlington Northern is a buy, counsels Guy Adami, but not at current levels.
I agree with Buffett’s rail play, says Tim Seymour. 30% of the grain harvest and 65% of coal is moving on rail. I think it’s a long-term trend.
I like American Express, adds Karen Finerman. It’s a premiere franchise and I wouldn’t be surprised to learn he’s bought more.
Everyone likes value investing in concept, adds Jeff Macke, until a stock shoots up overnight, and then investors rush into the flavor of the moment. The lesson here is that Buffett takes his time and builds positions over the long-term.
> Whale Watching: Bill Ackman
> Whale Watching: Carl Icahn
> Whale Watching: John Paulson