What’s Wrong with Warren Buffett Stock Picks?
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Even though he is unquestionably the best investor on earth, Warren Buffett’s stock picks still get scrutinized and talk of Buffett losing his touch still surface. It’s understandable as the U.S. is battling with the credit crunch that we would look towards Warren Buffett investment advice for guidance. However, even Berkshire Hathaway holdings can take a momentary dip. This is not unexpected as Buffett’s latest letter to shareholder’s declared that despite a glorious 2007 year, things would not look so rosy for the insurance business. And the insurance business is Warren Buffett’s bread and butter.
Buffett built Berkshire Hathaway in the property and casualty business. With the premiums, it generates a lot of float for Buffett to invest in other companies. However, the P&C industry is also cyclical in nature. Buffett himself warned to expect “lower insurance earnings during the next few years”. So the Oracle of Omaha obviously knew what was coming and notified his Berkshire investors not to panic. This is in contrast to other funds and investment bankers who got caught with their pants down in the credit crunch. And people are still complaining? Sure, stock investments in the insurance and the banking industries are soft but Buffett is also sitting on more than $40 billion in cash just waiting for the opportunity to pick up some under valued companies in the recession.
And lets not forget that every time the U.S. sneezes, the rest of the world catches a cold. The world’s biggest economy still has a lot of influence in the rest of the world and it is likely that the next additions of stocks to buy could be from abroad. Here is another Warren Buffett quote to shed some light on Buffett’s views on the U.S. economy: “But, we are still very important in the U.S., and we are still very linked in many ways. But we aren’t as important as we used to be relative to the rest of the world.”
Last year, Buffett went on a highly publicized trip to China and South Korea where he visited the plants of a Berkshire Hathaway subsidiary – Israel’s Iscar MetalWorking. Obviously, the 77-year old is not being complacent and is looking to add more companies in the Warren Buffett portfolio even if he has to look outside of U.S.
So despite the fact that Warren Buffett’s stock picks and stock investments are being questioned, don’t count the man out. He clearly has a pulse on the world markets and we should all heed Buffett’s investment advice.
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