Chip Somodevilla / Getty
- Warren Buffett’s bargain hunt is unsustainable in the current downturn, investor David Merkel said in two articles on the Aleph blog this week.
- Berkshire Hathaway boss will not find the same deals as in past crises because the federal government is backing the stock market and private equity firms are going to outbid it, Merkel argued.
- “When your ability to get cheap assets becomes almost zero, isn’t it time to reassess if the world around you has not changed?” ” He asked. “It’s time to reinvent yourself, Warren. “
- Visit the Business Insider home page for more stories.
Warren Buffett has to change his investment strategy because finding good deals doesn’t work, investor David Merkel told the Aleph blog this week.
If federal authorities continue to invest money in the economy and throw lifelines at struggling businesses, “the market will not fall enough to offer the values of a lifetime,” Merkel said in an article. published Monday on his investment blog. “Buffett’s money cannot buy a good business at a cheap price. “
Read more: Bill Miller’s record fund has beaten the market for 15 consecutive years. He explains why he’s still optimistic about the airlines, even after Warren Buffett has quit the industry twice.
Merkel doubled investment in Buffett’s Berkshire Hathaway earlier this year, in part because he expected the investor to take advantage of the conglomerate’s $ 128 billion to buy stocks when selling coronavirus , he said in a follow-up article on Tuesday.
After Berkshire revealed that it had only made $ 1.8 billion in net share purchases in the first quarter and that it had withdrawn about $ 6.1 billion from stock sales in April, Merkel has reduced its stake to its original size.
“There were certainly decent values to be achieved at the end of March,” he said. “You wouldn’t blow up the whole heap, but surely you should have bought something.” “
Buffett may have held back because he has an “outdated view” of the potential decline in the stock market, said Merkel. It may not go as far as it did in past crises, because policy makers support it, he argued.
Read more: MORGAN STANLEY: Buy these 20 stocks designed to take advantage of rising inflation that will change the investment landscape
“The Fed replaces Warren Buffett”
While Merkel is “very strongly” thinking of Buffett, he warned that the boss of Berkshire was in danger of being usurped by the Federal Reserve because it plays a more important role in the financing of companies.
“The Fed replaced J.P. Morgan,” said Merkel, referring to the powerful financial and industrialist on Wall Street. “Now the Fed is replacing Warren Buffett. “
The central bank is not the only obstacle to Buffett’s signing strategy of identifying and investing in undervalued companies. If he finds a quality company at a fair price, Merkel said, private equity firms will rush after him and outbid because they know “Buffett never pays the best price.”
“When your ability to get cheap assets becomes almost zero, isn’t it time to reassess if the world around you has not changed?” Asked Merkel. “It’s time to reinvent yourself, Warren. “
Read more: A health equity group is experiencing the biggest market comeback after a crash and has returned 1,000% in the past decade. An investment firm says there is even more upside – and shares 3 companies it buys.