What to do with the money ?: Warren Buffett is betting on these stocks

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Saturday, February 27, 2021

What to do with the money
Warren Buffett is betting on these stocks

From Jan Gänger

Warren Buffett buys billions of dollars in shares in his own company. It's not original. It looks like that
Investment guru slowly runs out of ideas.

What does Warren Buffett do when he has too much money and there aren't enough lucrative businesses to invest in? He's buying back shares.

Berkshire Hathaway 364,580.01

The legendary investor today mailed his annual letter to the shareholders of his investment company Berkshire Hathaway. And it shows: The conglomerate spent a whopping $ 24.7 billion last year to buy back its own shares. On top of that. Buffett announced that he would continue to buy Berkshire shares.

Share buybacks are usually used to maintain prices. Because this reduces the number of shares for which a dividend is distributed. So it is spread over fewer papers – so each shareholder gets a little more of the dividend cake.

Nevertheless, his fans should not be met with undivided joy. Because the step shows: The master can hardly find ways to implement his celebrated strategy. Buffett had long been reluctant to buy back Berkshire stocks as he favors investing in long-term growth.

Apple is gaining weight

But Buffett has been struggling with acquisitions for a long time because the valuations are too high for him. The question arises as to whether the 90-year-old is slowly running out of ideas. Although his concept has been hugely successful in the past, Buffett generated lush returns. But in recent years its shine has faded a little.

Buffett only wants to invest in industries that he understands himself. In addition, companies have to make money and pay dividends on a permanent basis. But that's not all: the business has to be protected from too much competition – and above all, the company has to be worth less on the stock exchange than it actually is. And that's why Berkshire is sitting on cash reserves of around $ 138 billion.

Meanwhile, Buffet's investments at the end of last year were worth around $ 281 billion. The largest of these falls on Apple at $ 120 billion. Berkshire now holds 5.4 percent of the company, more than a year ago – even though Berkshire has sold part of its package in view of the strong price gains. The reason: Like Buffett, Apple doesn't know what to do with the money and is therefore buying back its own shares.

These are Berkshire Hathaway's largest positions (as of December 31, 2020 in billion dollars):

  • Apple $ 120,424
  • Bank of America $ 31,306
  • Coca-Cola $ 21,936
  • American Express $ 18,331
  • Verizon $ 8,620
  • Moody's $ 7,160
  • U.S. Bancorp $ 6,904
  • BYD $ 5,897
  • Chevron $ 4,096
  • Charter Communications $ 3,449
  • The Bank of New York Mellon $ 2,837
  • AbbVie $ 2,736
  • Merck & Co. $ 2,347
  • Itochu $ 2,336
  • General Motors $ 2,206

. (tagsToTranslate) Economy (t) Warren Buffett (t) Berkshire Hathaway (t) Investors (t) Apple