Warren Buffett and Michael Burry both filed 13F reports last night. These give investors like me an insight into what stocks the investors have been buying this year.
Both filings indicate a degree of caution in the stock market. Buffett’s investment activity slowed significantly in the second quarter and Burry sold almost everything from his US stock portfolio.
So are the investors expecting a stock market crash? And what does that mean that I should do with my investments right now?
Michael Burry
Burry’s 13F filing was one of the most striking from the recent quarter. The CEO of Scion Asset Management sold almost all of his US stock positions.
Between April and June, Burry sold all his stock in no fewer than eleven US companies, including Alphabet, Meta Platforms, and Bristol-Myers Squibb. The only stock Burry bought was prison owner GEO Group.
Unlike Buffett, Burry has been vocal about his views on the stock market. The Scion CEO has tweeted his belief that the stock market rally won’t last.
Burry’s 13F indicates to me that he’s backing up his words with his actions. Selling his entire US portfolio down to one beaten-down real estate stock tells me that Burry is expecting a stock market crash.
Warren Buffett
Unlike Michael Burry, Warren Buffett did buy stocks in the last quarter. But it looks to me as though the Berkshire Hathaway CEO also has significant reservations about share prices.
With around $70bn available to invest, Buffett only used around $4bn on stock investments plus an additional $1bn on buybacks. This means that the Oracle of Omaha left substantial cash on the sidelines.
Furthermore, all of Buffett’s investments were in businesses that Berkshire already owned shares in, such as Apple, Chevron, and Occidental Petroleum. In other words, Buffett didn’t see any new opportunities worth investing in.
This marks a substantial slowdown from the previous quarter, when Berkshire made 15 investments, including eight new ones. That’s in addition to agreeing a deal to buy Alleghany outright.
While Buffett doesn’t make stock market predictions, I think his hesitance in buying shares is important. It indicates to me that he thinks prices are high at the moment.
What should I do?
Michael Burry and Warren Buffett think about the stock market differently. Where Burry attempts to forecast share price movements, Buffett focuses on the underlying businesses.
Despite this, there seems to be a similar message coming from their 13F filings. And I think this is significant.
To me, it seems clear that both investors see stocks are expensive at the moment. Whether or not a stock market crash is on the way, I’m taking this seriously.
As a Warren Buffett follower, I’m not selling my stocks. But I am looking to be cautious in my investments and being extra careful to makes sure that I’m not overpaying.
