Warren Buffett busts a myth about Warren Buffett 🤑

Just because he buys cheap doesn't mean he's a great market timer 🕰

Warren Buffett (L) and Charlie Munger (R) at the Berkshire Hathaway Shareholders Meeting in Omaha, Nebraska on April 30, 2022. (Source: Getty)

OMAHA, Neb. — Warren Buffett’s Berkshire Hathaway loaded up on stocks as stock prices fell earlier this year.

On Saturday, Buffett revealed that the company bought $51.1 billion worth of stocks during the first quarter. In a slide presented at Berkshire Hathaway’s annual shareholders meeting on Saturday, he noted the buying included a stretch between February 21 to March 15 where the company plowed $41.0 billion into the market. Berkshire spent a whopping $4.6 billion on March 4 alone.

“We spent $40 billion in a hurry, in three weeks,” Buffett said. “Now we’re back, somewhat, in our more lethargic mood.”

The first quarter saw the S&P 500 plummet by as much as 13.7%, hitting a low of 4,114 on February 24, before recovering a bit to end the quarter down 4.9%.

Berkshire’s trading activity seems to echo one of Buffett’s most famous quotes: “​​Be fearful when others are greedy, and be greedy when others are fearful.”

But, don’t assume that this buying is Buffett signaling to the world he believes the stock market has bottomed.

‘We have not been good at timing’

Buffett’s reputation as a value-oriented investor with a track record of market-beating returns may have some folks thinking the “Oracle of Omaha” is a successful market timer (i.e., someone who makes trades based on the belief that prices have peaked or hit rock bottom).

Indeed, one of his most prominent calls to buy stocks occurred during some of the darkest hours of the financial crisis.

However, he made clear on Saturday that he is no market timer.

“We haven't the faintest idea what the stock market is gonna do when it opens on Monday — we never have,” Buffett said.

He reflected back on the financial crisis, noting that Berkshire “spent about $15 or $16 billion” buying stocks around the time Lehman Brothers had failed in fall of 2008. This turned out to be months before the market would eventually reach a low.

“It was a really dumb time [to buy stocks], and I wrote an article for the New York Times on ‘Buy American,’” he said.

After that article was published, the S&P 500 fell another 26% before bottoming in March 2009.¹

“If I had any sense of timing and waited six months until—” he started to say. “The low was in March… I totally missed that opportunity.”

He continued to come clean.

“I totally missed, you know, March of 2020,” he said of when the stock market began a new bull market after crashing during the onset of the pandemic. “We have not been good at timing.”

Indeed, if Buffett and his team at Berkshire had conviction in their ability to predict the turns in the market, then maybe the company wouldn’t have had to report $1.8 billion in unrealized losses on its securities portfolio during Q1.²

See you in 20 years

Buffett reiterated that his trades are informed by the long-term prospects of the businesses he’s buying, not his short-term expectations for the market or the economy.³

"I don't think we've ever made a decision where either one of us has either said or been thinking: ‘We should buy or sell based on what the market is going to do,’" Buffett said.

These comments come as market volatility remains very high. On Friday, the S&P 500 plunged 3.6%. For the month, the S&P was down 8.8%, its worst month since March 2020 and worst April since 1970.

Fortunately for investors like Buffett, what happens in the weeks following a buy doesn’t make or break a trade.

“Over the next 20 years, I would expect [Berkshire’s stock portfolio] to have more capital gains than not,” Buffett quipped. 

It’s worth noting that since 1926, there’s never been a 20-year stretch during which the stock market didn’t generate a positive return.

“I’ll report to you in 20 years whether it’s happened or not.”

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