Warren Buffett said he's buying U.S. stocks and, if prices stay attractive, his personal investments - distinct from his stake in Berkshire Hathaway Inc. - will soon be wholly in American equities.
Writing in the New York Times yesterday, the Berkshire chairman and chief executive officer said he is following the principle of being fearful when others are greedy, and greedy when others are fearful.
Exaggerated concern about the long-term prosperity of financially secure U.S. companies is foolish, and most will probably be setting profit records in years to come, Mr. Buffett said.
While short-term stock movements can't be foretold, the likelihood is that the market will recover before either the economy or general investor sentiment do, and "if you wait for the robins, spring will be over," he said.
Referring to the Great Depression of the 1930s, Mr. Buffett pointed out that the Dow reached its nadir on July 8, 1932; economic conditions continued to deteriorate until Franklin Roosevelt became president in March, 1933, and by that time the market had climbed 30 per cent.
Bad news, Mr. Buffett concluded, is an investor's best friend, for it enables them to buy "a slice of America's future at a marked-down price."
Mr. Buffett, ranked the richest American by Forbes magazine, built Omaha, Neb.-based Berkshire over four decades, transforming a failing textile manufacturer into a $180-billion (U.S.) holding company by buying out-of-favour securities and businesses.
He committed at least $28-billion this year to acquire companies, finance buyouts and purchase securities for Berkshire after the contraction in global credit markets drove down stock prices and sent companies searching for funds. Berkshire was the largest stockholder of Coca-Cola Co., Wells Fargo & Co., and Kraft Foods Inc. as of June 30, according to Bloomberg data.
Investors mimic his stock picks in an effort to duplicate his success. An academic study in 2007 found that using this strategy for 31 years would have delivered annualized returns of about 25 per cent, double the gains of the S&P 500.