Warren Buffett is buying stocks again. After a lengthy stretch of struggling to see attractive investment opportunities in the stock market, the Berkshire Hathaway CEO has recently made substantial investments in Chevron, HP, Occidental Petroleum, Activision Blizzard, and Apple.
Share prices have been coming down lately amid fears of inflation, rising interest rates, and supply chain shortages. It’s also hard to see when sentiment might start to turn around.
The bear market continues, but Buffett clearly thinks that prices have reached a level at which an investor can earn a meaningful return. So should I be following Buffett’s example and investing in stocks?
Buying now
To be clear at the outset, I have no idea whether stock prices are going to continue falling, or whether they might turn around soon. If I buy shares in a company today, there’s a risk that they might be on sale next week for less than I paid for them.
But Buffett also has no idea where share prices might go next. His investment in Verizon – which currently trades below the price at which Berkshire Hathaway was buying shares – is a good example of this.
What matters for Buffett, as an investor, is not whether or not share prices have reached their lowest levels. Rather, what matters is whether they’ve reached a level that is low enough to be attractive from an investment perspective.
Buffett’s activities in the stock market clearly indicate to me that he thinks there are at least some stocks that have reached a level low enough to justify an investment. That tells me I should be looking for opportunities too.
Being selective
I think it’s worth noting, though, that Buffett isn’t investing in companies across the board. Rather, he’s being quite selective in his investments, choosing to invest significant amounts of money in specific individual stocks.
For my own portfolio, I’m trying to follow Buffett’s lead. As a result, I’m looking at buying shares in businesses where prices have now fallen into attractive territory.
The most obvious example of this for me is Rightmove. When shares were trading at close to 800p, I didn’t see the return opportunities for an investor, but at 530p, I’m happy buying the stock.
I’m also looking at Legal & General. With the company’s shares trading at 230p, I find them much more attractive than I did when they were priced above 300p.
Conclusion
Overall, I think that I should be buying shares in the current market. I think that following Warren Buffett’s example and looking to be selective in taking advantage of specific opportunities is the way for me to invest with stock prices coming down across the board.
