Buffett Has Been Selling Stocks In 2020: Here’s Why

In this video we try uncover the underlying reasons why Warren Buffett's Berkshire Hathaway has been selling stocks in 2020...

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When we look at Warren Buffett’s stock moves in 2020, something glaringly obvious pops out, Buffett has got rid of a lot of his stocks. With his investing firm Berkshire Hathaway
he sold over 19 out of his 69 stocks in the first quarter of 2020 alone. This now leaves him with 50 stocks left in his portfolio.

One major question must be asked. Why did Buffett behave in a completely different way to which he normally would. Normally Buffett is by a far a net buyer of stocks, every single year. Why is 2020 different?

The first thing we need to talk about is the underlying economy. There is a stark difference between the economy of 2019, and the economy of 2020. Let me explain…

I don’t know if you guys remember the headlines of 2019 but it was all about the strong economy. It was the longest bull market in history, jobs had grown for 106 consecutive months, the unemployment rate was low at 4%, by most measures the economy was firing.
It was kind of like Trumps claim to fame, certainly if you looked at it his twitter account he was not afraid to talk about the economy.

But now fast forward to 2020. A crisis occurred, that no one could have predicted. A virus swept throughout the world, causing countries to go on lockdown, businesses to shut and people could no longer work. And I’ll give you 2 guesses on what this did to the economy...

Yup you guessed it, the economy basically halted in its tracks… First quarter of 2020, instead of growing like it normally does, it shrunk by 4.8%. But what’s even more startling then this, Is experts predict the 2nd quarter of 2020 to be a lot worse. They’re predicting around a 30% decrease in GDP, when the true effects of the virus and lockdown start to sink in… (1)

So if you think about it, In 2019 when Warren Buffett was buying a lot of stocks, it was a totally different ball game. Because the economy was on fire then.

And when the economy is going well, what does this mean? It means businesses are producing a lot of output and therefore making a lot of money. And at the end of the day, this is exactly what us investors look for in a business, how much money are you making…?

2019 the answer to this question was we’re on fire. We’re producing a lot and earnings are high. But 2020 it’s a totally different story with regards to output and profit.This is a key reason why Buffett’s stock moves have been totally different to last year. The economy just isn’t the same…

But this does leave, one bulging question which comes at us. Hang on. Isn’t Buffett’s strategy to buy when everyone is panicking. Aren’t some of his most famous words to “be greedy when others are fearful and fearful when others are greedy”. Surely this means Buffett would be buying a lot of stocks during these times? Not so soon. There is something else I need to show you…

You see the reason why Buffett likes to buy when everyone is fearful is because normally stock prices are down big during these times. However the interesting thing that is happening, is that stock prices have been going up.

Over the past 2 months, stocks are up over 35%. It would appear that investors are not fearful in the least. In-fact they’re bullish. Overall after all of this has happened stocks are only 10% down from their all-time highs! (2)

So we’re in this weird phenomena where the economy has been getting absolutely destroyed yet the stock market is up. We’re not seeing the cheap prices in which we normally would, when the economy takes a downturn.

Because Buffett is basically the epitome of value investing and waiting for good deals, his company Berkshire Hathaway is staying on the side line and has in-fact sold a lot of stocks…

But this isn’t the only reason why he’s behaving so differently in the stock market… This is just the recent events that have happened. It’s kind of like the cracks in the iceberg. But we can’t ignore the fact that the iceberg was already unstable in the first place…

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DISCLAIMER: It's important to note that I am not a financial adviser and you should do your own research when picking stocks to invest in. These are just some of my viewpoints, by no means would I recommend watching one YouTube video and then immediately buying that stock. This video was made for educational and entertainment purposes only. Consult your financial adviser.