Warren Buffett continues to demonstrate why he is the greatest of all time.
“A rising tide lifts all boats” is a proverb. Thus, an investor’s performance in the most unpredictable and volatile periods is the real litmus test.
And it’s safe to say that we live in a very uncertain moment right now. Approximately 300 S&P 500 firms’ earnings calls included the word “uncertainty” in the last month alone, according to data from AlphaSense, while 327 businesses have released their results.
The constantly shifting tariff environment and evidence indicating a faltering economy are the causes. It is ideal for Buffett.
The S&P 500 index SPX has fallen 8.8% since its record close of 6,144.15 on February 19, despite having surged 8.7% during an eight-day winning streak until Thursday’s close.
Berkshire Hathaway Inc. (BRK.B), Buffett’s investment vehicle, has seen a 9.6% increase in share price since February 19, outperforming the S&P 500 by 18.4 percentage points over that period.
When President Donald Trump’s “liberation day” tariff announcement shook the stock market on April 3, Berkshire’s shares outperformed the S&P 500 by a whopping 26.5 percentage points throughout that 51-day period.
“Buffett is proving that he’s ahead of everybody else, again,” stated Mike O’Rourke, a prominent Buffett watcher and chief market analyst at JonesTrading. “He’s just doing what he’s always done.”
In October 2008, during the height of the financial crisis, Berkshire Hathaway’s stock last outperformed the S&P 500 over a 51-day period by the same amount as it has recently. Additionally, it did so several times during the 2000 dot-com bust.
Previously, as veterans remember, it did so in early 1998, just before the Russian debt crisis that caused hedge fund Long Term Capital Management to fail.
When the so-called Oracle of Omaha addresses Berkshire’s annual shareholder meeting on May 3, investors will undoubtedly be seeking some direction regarding the current unstable and uncertain market climate.
However, it’s not as though Berkshire’s stock exclusively does well in difficult times.
In late 2024, when the artificial intelligence boom continued to drive the stock market to new heights, many had questioned Buffett’s cash hoarding. Additionally, Buffett had no stock in Nvidia Corp. (NVDA), the company that drove the AI surge.
Don’t overlook: Opinion: Warren Buffett reduces his stake to U.S. stocks after warning of “scoundrels” and “fiscal folly.”
Berkshire’s stock rose 18.9% in the year before the S&P 500’s peak on February 19, falling only 3.6 percentage points short of the S&P 500.
The S&P 500 and the stock had a 0.89 correlation, whereas a 1.00 would indicate that their movements were exactly in time.
In contrast, the S&P 500 has increased 191.9% over the ten years ending February 19 and Berkshire’s shares has increased 224.8%. During that period, there was a 0.97 link between the two.
What did Buffett know, some might ask, when he began reducing his equity holdings well before the top, including cutting his holdings in Apple Inc.’s shares (AAPL)?
Buffett doesn’t try to forecast the future, as O’Rourke clarified. As usual, he is modifying his holdings according to the value he perceives in the companies he is familiar with.
According to O’Rourke, he essentially wants to acquire stocks of reputable companies at competitive rates. He has nothing against making a little profit if prices are too high by his standards, and he isn’t concerned about how much more prices might increase after he sells.
He buys on weakness and sells into strength without attempting to predict tops or bottoms.
Buffett will therefore not worry that he has already sold if the stock market continues its recent run to new highs. However, O’Rourke pointed out that he has enough cash on hand to go shopping for equities that are fairly valued if the recent decline continues as the economy continues to deteriorate.
Investors might get a preview of what might happen next on Saturday. And perhaps this time they will pay attention.
