As one of the most successful investors alive today, it’s not too surprising to hear that Warren Buffett seemingly predicted the recent US stock market correction. While Buffett didn’t explicitly call for stocks to fall, he’s repeatedly highlighted his concerns over valuations. What’s more, actions often speak louder than words.
His investment firm, Berkshire Hathaway, has been hoarding cash – a process that started back in 2024 following a series of sell trades. In fact, he sold around $134bn worth of shares last year, which included reducing his stake in Apple and Bank of America. Skip ahead to today, Berkshire now has around $334bn of cash just sitting on the balance sheet awaiting deployment.
Be fearful when others are greedy
Following the stock market correction in 2022, plenty of US businesses were trading at discounted valuations, in particular growth stocks. So it’s no surprise Buffett was a net buyer of shares that year. In fact, across all his trades in 2022, he put roughly $34bn of capital to work.
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What followed was two years of phenomenal growth. Since the end of 2022, the S&P 500 climbed almost 60% before the recent market downturn. At the same time, the Nasdaq was up close to 90% over the same period. For reference, the stock market average return is usually closer to 10%.
With valuations once again getting out of hand, Buffett started heeding his own advice and started selling shares. In 2023, he sold a net of $34bn of shares. In 2024, this number increased to $134bn. And now that US stocks are once again in decline, Berkshire has an enormous cash pile to snap up new bargains just like in 2022.
Be greedy when others are fearful
Despite the significant slide in valuations, Buffett’s opinion of an overinflated market seems to remain in place. He’s explicitly expressed concerns over the geopolitical landscape and the impact of US tariffs on consumers as prices are expected to rise.
As such, it seems Buffett’s looking abroad to international markets for bargains. And for investors aiming to follow in his footsteps, the FTSE 100 might be a perfect hunting ground for buying opportunities. Take Hikma Pharmaceuticals (LSE:HIK) as an example.
The healthcare enterprise is rapidly expanding its dominant position in the generics space, making drugs and treatments far more affordable for patients. Altruism aside, management’s strategy is proving to be highly lucrative, with revenue and earnings maintaining a consistent upward trajectory that’s resulted in 13 years of continuous dividend hikes at an average growth rate of 14%.
Yet, despite its trajectory, Hikma shares are still only trading at a forward price-to-earnings (P/E) ratio of 11.5. That’s about half the forward P/E of the S&P 500 right now.
Being a pharmaceutical business, Hikma’s far from a risk-free enterprise. Drug development is costly even when making generics. Not to mention, the intense level of competition forces Hikma to innovate continuously or be left behind.
Nevertheless, it looks like a potentially attractive opportunity worthy of closer inspection, in my opinion. And it’s not the only bargain on the London Stock Exchange that investors can consider to diversify away from high volatility US stocks.
