I find it insightful to pay attention to some of the greatest investors of all time – Warren Buffett. Many of our clients know what fans of Mr. Buffett’s investment prowess. We have differing view of some of his other views – but that is for another day.
Clearly he is one of the best investors, and for that we are all blessed to have the opportunity to see his moves “real time”, as opposed to post-mortem. I think he got one very right at the end of September.
While stock prices are gyrating, Mr. Buffett is buying back some of his own stock – the company is buying back their own shares. He publicly said he would spend up to $30 Billion of the current cash the company has buying their own shares. One of the smartest investors on Wall Street is buying back his own stock.
Buffett is possibly the greatest “value hunter on earth” – clearly he has a choice of any and every investment opportunity that presents itself. . I think Buffett is signaling (with his own cash) the deep undervaluation of great companies.
In August, 198 companies authorized the same thing – share buybacks. – putting 2011 on track for the busiest year on record for share buybacks. This in a time when retail investors have been leaving the stock market in droves. Hmmmmmm.
In my opinion, we may look back on that announcement as an event as momentous as the first week in March of 2009 when regulators suspended their (ignorant – my opinion) mark-to-market regulations that many believe was the match that lit the 2007-2008 financial calamity. If you look at a chart of the stock market, that was the bottom. We may have witnessed (or be witnessing) another bottom.
The Message: When investors are fearful, that is the time to buy; when investors are greedy, that is the time to sell.
When investors are trying to run out of the theatre clutching their cash, and find the doorway blocked by Warren Buffett (and hundreds of S&P CEOs) pushing wheelbarrows full of cash into the show, it might just be wise to go back to your seat and think for a few minutes….