Warren Buffett expects a short time correction!

2023年9月7日

Let's put the possible double-top formation pattern aside and look under the hood.

The most recent Berkshire Hathaway 13F filing was on August 14, 2023. The top 10 holdings, as a percentage of the portfolio, were as follows:

Apple (AAPL): 49.6%
Bank of America (BAC): 8.0%
American Express (AXP): 6.5%
Coca-Cola (KO): 5.4%
Chevron (CVX): 4.2%
Kraft Heinz (KHC): 3.8%
Occidental Petroleum (OXY): 3.7%
D.R. Horton (DHI): 1.0%
Capital One Financial (COF): 0.9%
NVR (NVR): 0.3%
Lennar (LEN): 0.2%
There are a few notable changes from the previous quarter:

Berkshire increased its stake in D.R. Horton, Capital One Financial, NVR, and Lennar.
Berkshire decreased its stake in Occidental Petroleum.

As you can see Half of the portfolio is AAPL and more than 15% is financial services!

BRK.A performance shows that in the case of a bearish market, it can experience a 30-50% correction!

Munger's advice:

hold on to your investments, even when they are down, as long as you believe that the underlying business is still sound. He said, "if you sell a business because it's down 50%, you're selling it for the wrong reason."

Warren Buffett about holding cash:

"Cash is a terrible long-term asset. It will depreciate in value over time. But cash is a wonderful short-term asset. It gives you the flexibility to act when opportunities arise."

Buffett's quote highlights the importance of having cash on hand, even though it is a depreciating asset. Cash allows investors to act when opportunities arise, such as when the market is down or when a good investment becomes available.

Buffett also believes that it is essential to be patient when holding cash. He has said that "the best time to buy is when there's blood in the streets." This means that it is often best to buy investments when they are down in price, as this is when they are most undervalued.

Of course, there is a risk of holding too much cash. If the market continues to rise, investors who are holding cash may miss out on the opportunity to generate returns. However, Buffett believes that the risk of missing out on some returns is outweighed by the risk of not having enough cash to take advantage of opportunities when they arise.

Conclusion:
As you can see Buffett sits on the highest cash level, which means he expects short-term correction!
*Yellow line 5-year average cash on hand.

Risk assessment: Do you think the risk of missing out at this point outweighs the correction? or the opposite?

Action: After reading this article what would you do?