Buffett Still Isn't Buying

By Alex Eule |  Monday, May 4

Cold Feet. Warren Buffett has become a crisis meter for investors. His decades of astute purchases near market bottoms have signaled that better days were ahead. So what does it mean that, so far, Warren Buffett has been sitting on his hands? Until this past weekend, we didn't really know. Now we do: Buffett remains cautious. 

In fact, he's so cautious that he sold his entire stakes in four airlines at a loss. Buffett had amassed large positions in Delta, Southwest, American, and United. 

“Our airline position was a mistake,” Buffett told investors during Berkshire Hathaway's annual meeting on Saturday evening. “Berkshire is worth less today than if I hadn’t made that decision.” (Nicholas Jasinski has more on the meeting here.) 

The candor made his lack of big stock purchases all the more telling. While Buffett said "American will prevail again," he wasn't pounding the table for stocks -- not even his own. Andrew Bary notes that Berkshire Hathaway bought back just $1.7 billion of its own stock in the first quarter, down from $2.1 billion in the fourth-quarter. The decline in buybacks is surprising given that many see Berkshire stock as cheap -- it's down 21% this year. (Shares fell another 2.5% on Monday.) 

Berkshire now has a record $137 billion of cash, Andrew notes, up from $128 billion at the end of 2019. Buffett is saving up for a better time to buy, and clearly he doesn't see it, yet. 

Buffett's caution was a big factor in stocks opening down Monday morning. The Dow Jones Industrial Average was off 362 points, or 1.5%, a few minutes into the trading day, before recovering to end the session up 26 points. 

"Warren Buffet's unusually cautious words gave a lot of bulls cold feet," Gorilla Trades strategist Ken Berman wrote today. But maybe Buffett is just wrong about stocks, Berman adds: 

This might just mean that the value-conscious Buffett found the outlook too uncertain in light of the pandemic and the world-wide lockdowns, and this was one of the few occasions when he missed a great buying opportunity. Stay tuned!

A continued rally in oil helped lift stocks. West Texas Intermediate crude rose 3.1%, to $20.39 a barrel Monday. Over the last four trading sessions, crude is up 65%. Energy stocks led the list of leaders, with Phillips 66 up 10.7%.

Airlines, meanwhile, made up four of the six top losers. Investors are still giving Buffett plenty of credit.