WOW!!! Warren Buffett Investments lost $ 11.2 billion in 1 week - the stock market is now in a correction, with major indices falling by more than 10% from their January highs. And the correction has not been spared from Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), a conglomerate led by billionaire investor Warren Buffett. In fact, Berkshire shares slightly offset the market, causing Buffett's net worth to fall by more than $ 11 billion.
Buffett Berkshire Hathaway shares are worth $ 11.2 billion less
Over the past 12 years, Warren Buffett has gradually given his Berkshire Hathaway share as part of his plan to eventually donate most of his fortune to charity.
However, Buffett still has a large stake in the company. In 2016, Buffett still has 308,261 class A shares, and he handed over 18.63 million class B shares by mid-2017. Based on the A-to-B 1,500 conversion factor, some quick calculations say Buffett still has 295,848 Berkshire Class A shares. In this paper, this means a value of $ 85.2 billion.
This is a lot of money, but significantly less than the valuable Buffett stock about a week ago. Over the past week, Berkshire share prices fell 11.6% as part of the overall stock market correction.
BRK.A Price data by YCharts.
Thanks to this sharp decline, A Buffett's class A stock valued around $ 37,800 less than a week ago. Overall, Buffett's Berkshire Hathaway stock, which generates almost all of its net worth, has fallen by $ 11.2 billion.
What this means for investors
From the perspective of long-term Berkshire shareholders, the decline in Berkshire stock prices and overall market is likely to be a good thing. For starters, this is an opportunity to buy stocks at much more attractive prices than has been traded lately.
More importantly, the market correction could give Berkshire an incentive to finally solve one of the biggest problems - what to do with a cash savings of $ 109 billion. Berkshire wants to acquire the company, increase its stock position, or buy back its shares if and only if the price is right. While the Berkshire investment acquisition and evaluation process is a closely guarded secret, it is fair to assume that most of the potential targets look more attractive to the Berkshire team than they did a week ago.
As long as the stock buyback goes, Berkshire's current threshold is 1.2 times the book value, which is still well below the company's valuation. However, Berkshire has switched from about 1.74 times the book value to a multiple of only 1.54 due to a market decline. Buffett has indicated that Berkshire's board may be willing to adjust the buyback threshold if cash supplies continue to build, and this can certainly make it more interesting - especially if the (and Berkshire) markets continue to fall.
Underline is stupid
This is probably the most important takeaway for investors. Although Warren Buffett's ownership has fallen in value by 11 digits over the past week, it is highly unlikely Buffett is unhappy with it. He did not see it that way.
What Buffett seems to see is the stock market that goes on sale, a more attractive entry point for stock investment, better opportunities to find affordable acquisition targets, and better stock prices to consider applying for a buyback. As Buffett said after the financial crisis referring to the declining Berkshire stock portfolio:
"It does not bother Charlie [Munger] and me. Indeed, we enjoy such price reductions if we have the funds available to improve our position. In the past, Ben Graham taught me that "Price is what you pay; value is what you get." Whether we're talking about socks or stocks, I like to buy quality items when marked."
Although it has been rare for the past nine years, the stock market correction is a normal and healthy occurrence. They should not be feared. Instead, they should be embraced as long-term opportunities.
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