What To Do on the Stock Market in 2021? Warren Buffett Advises You To Bet on America
Succeeding from scratch is not an easy thing to do. To maximize your chances of success, you’ve already heard the advice that keeps coming back: get inspiration from those who have already achieved what you want to achieve.
Better yet, try to make these people mentors who will guide you along the way.
If this advice comes up so often, it’s a very good one. People who have already achieved what they want to achieve have probably already asked themselves the same questions you will ask yourself. The fact that they have succeeded indicates that they have successfully answered all those questions that determine whether or not you will succeed.
Having mentors is therefore something that increases your chances of success.
Warren Buffett’s opinion is always eagerly awaited in the investment world
In the investment world, Warren Buffett is a true legend. To many, the Oracle of Omaha is the greatest investor of all time. Hoping that Warren Buffett will become your mentor for success in the investment world is obviously utopian.
Warren Buffett is a very busy man who does not have time for that.
However, you can, and you must, listen to what Warren Buffett says. It will help you to understand a lot of things about the world of financial markets. At the age of 90, Warren Buffett is a true well of wisdom who never hesitates to share his vision of investment, of business, but also of life.
Every year, Berkshire Hathaway, his company with a market cap of more than $560 billion, publishes a letter to its shareholders.
This letter is a great annual event for all fans of Warren Buffett, and even for others. It’s always a long-awaited moment to find out what Warren Buffett thinks about the economic situation, but also what are the major strategic options he will follow with Berkshire Hathaway in the coming months.
Warren Buffett rates Berkshire Hathaway’s year 2020 as a bad one
The 2021 edition of this letter has just been published, and I highly recommend that you read it here: “Letter to Berkshire Hathaway Shareholders”.
Surprisingly, Warren Buffett says little about the coronavirus pandemic that brutally hit the world in March 2020. He begins by explaining that Berkshire Hathaway made a net profit of $42.5 billion in 2020. This profit was driven up by its insurance business, but it is down by almost 48%.
Warren Buffett believes that Berkshire Hathaway had a bad year in 2020 by not reaching any of the targets he had set:
“Last year, however, we met neither goal: Berkshire made no sizable acquisitions and operating earnings fell 9%.”
Nevertheless, the Oracle of Omaha explains that the company has managed to increase Berkshire’s intrinsic value per share by retaining earnings and buying back about 5% of their own shares.
In the mea culpa section, Warren Buffett admits that he made a mistake in investing in Precision Castparts (PCC) in 2016, which led Berkshire to an asset write-down of $11 billion. Warren Buffett fully accepts his mistake:
“I paid too much for the company. No one misled me in any way — I was simply too optimistic about PCC’s normalized profit potential.”
Warren Buffett maintains great confidence in the United States for the future
For the coming months, Warren Buffett is optimistic because he remains a strong supporter of the American dream:
“In its brief 232 years of existence, however, there has been no incubator for unleashing human potential like America.”
Warren Buffett points out that despite a particularly difficult year in 2020, due to the COVID-19 pandemic, “economic progress in the United States has been breathtaking”.
Despite the current crisis, which continues to be violent in the United States, Warren Buffett is convinced that American companies will pull through. A long-time Democrat, Warren Buffett also refers to the election of Joe Biden as a token of confidence for the future.
For Warren Buffett, the conclusion is simple:
“Never bet against America.”
The latest positions revealed by Berkshire Hathaway confirm this willingness to bet on America
For those wondering what to do in the stock market in 2021, when a Tech bubble threatens to burst with Tesla in the lead, Warren Buffett gives a hint on the strategy to follow for the coming months.
Warren Buffett’s willingness to bet on America is reflected in the 3 new positions unveiled by Berkshire Hathaway in mid-February 2021. The first is an important position of 8.6 billion dollars in Verizon, which is the leading telecommunications operator in the United States.
This position is in addition to the $628 million positions it began building in T-Mobile in 2020. Warren Buffett is clearly betting on 5G which should boost these companies in the months and years to come.
If Warren Buffett has reduced his positions in Apple, it is simply to take profits and take advantage of other opportunities. Berkshire Hathaway still owns 5% of Apple’s shares, which is currently valued at more than $110 billion. Here again, Warren Buffett expects to benefit from the 5G boom, as Apple produces the best 5G device on the market with its iPhone.
The $4.1 billion positions in Chevron shows that Warren Buffett is once again betting on America. Chevron has had a bad 2020 year, but Warren Buffett thinks the company is a significant opportunity at this level of valuation.
While he has just closed Berkshire Hathaway’s positions in Pfizer, Warren Buffett is betting on the pharmaceutical world for the coming months by strengthening his positions in Merck & Company Inc, AbbVie Inc, and Bristol Myers Squibb Company. Also, Berkshire Hathaway closed its positions in JPMorgan. A decision that is by no means insignificant.
Warren Buffett also explains in his letter that it is now preferable to avoid buying government bonds, in which Berkshire Hathaway is itself a major player with $3.4 billion of U.S. debt held. Warren Buffett’s conclusion on the subject is indisputable:
“Bonds are not the place to be these days.”
Finally, regarding speculation about his possible retirement, Warren Buffett makes fun of it at the turn of a paragraph in the letter to investors. He mentions the retirement of one of the oldest Berkshire executives, “at the ridiculously premature age … of 103 years”.
You can obviously expect Warren Buffett to be here in 2022 to present Berkshire Hathaway’s next letter.
As a retail investor, you should of course carefully consider what Warren Buffett thinks. His optimism about America is interesting, but it is then up to you to see what you want to make from it. As always, you should never blindly follow the advice of others.
Your role is to use all of this advice as input into your decision-making process. In the end, it is up to you to make the decisions, because it is your money future that is at stake.