The Valor Blog.
Investment News and Views, Direct from Our Team.

To buy, or not to buy?

Recently, we’ve come across a few articles discussing Berkshire’s enormous stockpile of cash (over $70 billion; increasing at around $1.5 billion each month). Some authors are suggesting that Berkshire should “hurry up and buy something already”. While it would seem obvious why Buffett needs little guidance from bloggers and amateur investors regarding the rational allocation of his capital, one individual in the comment section elaborated with some agreeable food for thought:

 

“With all due respect, it is always confounding to read advisories to Warren Buffett with respect to what he should be doing. The world is open for new ideas and I am certain that Mr. Buffett is constantly searching for such ideas. However, I doubt whether, “Buy something, already” is constructive counsel in any way. Berkshire can afford to defer overpaying for “opportunities” until the right one is available. If one doesn’t trust Berkshire to do this one should sell their stock because they are not likely to yield their bedrock investing discipline because a potentially overheated market is interfering with the occasional opportunity that Mr. Buffett seeks.
My own working hypothesis is that there is no one in the world better situated to be receiving and researching business opportunities than Berkshire. The fact that Mr Buffett will not alter his standards represents a continuing learning experience that all of us should embrace. I don’t understand the criticism or hortatory arguments that would suggest that Berkshire is not constantly looking for acquisitions or other opportunities on a daily or hourly basis. That contradicts decades of experience that we have had to observe Warren from afar. Lets never forget the principal axiom of medicine and investing, “Do no Harm.” Thanks for the opportunity to comment.”

*Mark Ross

 

The concerned investor raises some strong points that even those with a basic knowledge of Buffett’s track record would agree with. Only time will tell whether Mr. Ross is correct in his brief analysis of a 2016 Berkshire Hathaway. We believe that he will be.