Buffett’s Berkshire Hathaway shares hit 18-month low – Here’s how Buffett could take advantage of the bear market

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• Threatening US recession is also hurting Berkshire Hathaway

• Berkshire Hathaway bought more shares than ever before in the first quarter of 2022

• Buffett could use Berkshire’s low level for buybacks

2022 has been extremely disappointing for investors so far. Due to the aggressive rate hikes by the international central banks, there has been sadness on the international stock exchange floors for weeks. While investors are turning their backs on the stock exchanges in droves, star investor Warren Buffett is likely to be in top form again right now.

Berkshire Hathaway shares at their lowest since April 2021

While the S&P 500, and in particular the heavily weighted tech stocks, has been rushing south since January, Warren Buffets Holding Berkshire Hathaway even hit a record high of $362 in March. At the time, Berkshire’s securities were considered a rock in the surf: the broad-based investment vehicle with the extremely stable financial situation would come through the inflation period comparatively well, was the consensus at the time. But since then, Buffett’s stock has also fallen under the wheels. On September 26, at a price of 264 US dollars, it was at its lowest level in a year and a half, around 27 percent below the record high.

Recession hurts Berkshire holdings

The downward movement can be attributed to growing fears of a recession on the capital markets. As a microcosm of the US economy, Berkshire Hathaway is heavily exposed to the economy with various holdings in banks, insurance companies, software companies, retail and the energy sector and is likely to suffer considerably from a recession – at least significantly more than from inflation when the economy is running well at the same time. Some of the largest Berkshire holdings such as Apple, Bank of America or American Express are in the deep red for the year. More stable stocks, such as Coca-Cola or Kraft Heinz, as well as well-performing energy stocks, such as Occicental Petroleum, cannot compensate for this weakness. For this reason, it could well be that Berkshire shares fall even lower, as Theron Mohamed suspects on “Markets Insider”.

Buffett in the bear market: Finding bargains

However, the 92-year-old star investor is not fazed by the stock market crisis. On the contrary: In the first quarter of 2022 – the quarter in which Russia attacked Ukraine – Buffett bought shares worth 51 billion US dollars. This was a record value in his decades as an investor. It would not come as a surprise to many observers if the “Oracle of Omaha” lived up to its reputation as an anti-cyclical investor again in the coming weeks and aggressively collected shares at low prices. During the rapid stock market rally of 2020 and 2021, Buffett held back as he viewed company valuations as inflated. In the current bear market, on the other hand, one or the other interesting deal could come up for the old master. Recently there was even speculation as to whether Buffett would join the crisis-ridden Swiss bank Credit Suisse. The star investor attracted attention as a shrewd anti-cyclical investor during the 2008 financial crisis, when he bought blocks of shares in Goldman Sachs (worth $5 billion) and General Electric ($3 billion) at a bargain price that few others could match investor was willing or able to make such an investment.

Is Buffett Buying Back More Berkshire Stock Again?

There is also speculation that Buffett could buy back more Berkshire shares after months of reluctance. In 2021, buybacks averaged $6 billion per quarter, but Buffett has been more cautious about 2022. In the first quarter of 2022, Buffett’s repurchase volume was only $3.1 billion, he didn’t buy any Berkshire shares in April and May, and a $1 billion package in June. The reduced share buyback is likely to be related to the fact that the Berkshire CEO has found more attractive alternative investments in recent months. If Berkshire shares remain at a discounted level, Buffett is likely to make more use of them again. Many experts consider the Berkshire shares to be undervalued at the current level. For example, according to “Börse Online”, analyst Edward Jones calculates that Warren Buffett’s holding company is currently trading at 1.25 times its book value. That level is well below the historical average of 1.4, which certainly shouldn’t have escaped Buffett’s notice.

Buffett’s legendary cash reserves

The stock market legend always has enough cash reserves for the share buyback: According to “Market Insider” data, Berkshire held $105 billion in reserves at the end of June – $75 billion more than the self-imposed minimum reserve of $30 billion . Buffett’s deputy and potential successor, Greg Abel, meanwhile, took advantage of Berkshire’s weakness and bought a large $68 million block of shares for his own portfolio.

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