Buffett Stays Cautious⚠️: No Rush to Buy the Dip

Warren Buffett said in an interview with CNBC that although he has stepped down as CEO of Berkshire Hathaway, he remains closely involved in investment decisions. He still goes to the office every day and calls Berkshire’s head of financial assets, Mark Millard, before the market opens to discuss market developments. However, final decision-making authority now rests with the new CEO, Greg Abel.

When asked whether he had made any new investments, Buffett replied that there had been “one tiny purchase,” but he did not disclose the amount or the specific asset.

Buffett also hinted during the interview that although U.S. equities are currently in a correction phase, the situation is far from a historic buying opportunity. He noted that during his career, he has experienced three major market declines of over 50%, making the current pullback appear relatively mild. In his view, valuations are not cheap, and he is unwilling to enter the market merely to capture a roughly 5% rebound in the index.

This week, Berkshire purchased approximately $17 billion in U.S. Treasury bills. Treasury bills are short-term government bonds with maturities of less than one year and are effectively equivalent to cash. According to its annual report, Berkshire held nearly $400 billion in cash reserves at the end of last year, allowing it to remain highly flexible during periods of market volatility.

Buffett also acknowledged that he made a mistake regarding Apple, saying he sold too early.

Finally, Buffett stated that if he were leading the Federal Reserve, he is uncertain whether he would cut interest rates. Inflation and the stability of the banking system would be key considerations in any such decision.

Berkshire Resumes Buybacks in March, Signaling Long-Term Confidence in the U.S. Economy

Buffett’s latest interview did not reveal any clear “buy-the-dip” signals, so it is worth examining Berkshire’s actions from another angle.

In March this year, Berkshire resumed share buybacks after a two-year pause. The board only allows buybacks to proceed when both Buffett and Abel agree that the stock is trading below its intrinsic value.

Motley Fool analyst Keith Speights noted that if Buffett believes Berkshire’s current valuation justifies buybacks, then shares of certain companies may also represent attractive opportunities.

Buffett has long advocated that investors should “never bet against America.” Few companies represent the U.S. economy as comprehensively as Berkshire Hathaway, with more than 60 subsidiaries and an investment portfolio spanning nearly every major industry.

“If Buffett were not optimistic about the future of the U.S. economy, he would never approve buybacks. This reflects his long-term confidence in the U.S. economy, and the stock market is a barometer of that outlook,” said Keith Speights. He also pointed out that Buffett actively repurchased Berkshire shares during the 2022 bear market.

Buybacks Do Not Signal a Market Bottom

Keith Speights emphasized that Berkshire’s resumption of buybacks does not mean that Buffett and Abel believe current market valuations are broadly attractive.

Before stepping down as CEO, Buffett had been a net seller of equities for 13 consecutive quarters, and the S&P 500’s current valuation remains above the levels seen during that period of net selling.