On April 2, which President Donald Trump coined as “Liberation Day”, Trump announced high tariff rates against nearly all major trading partners of the U.S., including China, India, Japan, and Vietnam, among many others. The news caught the market by surprise and sent stocks spiraling. From highs made in late February, the broader benchmark S&P 500 (^GSPC -0.07%) fell close to 20%, essentially entering bear market territory.
However, later in April, Trump announced a 90-day pause on tariff rates, indicating that he was open to making trade deals, which sent the market into a furious rally. The S&P 500 is down about 4% this year (as of April 7).
Many have wondered whether the greats — like Warren Buffett and the investing team at Buffett’s company, Berkshire Hathaway — took advantage of the sell-off to buy the dip. While we still technically don’t know, we just got a major clue.
Berkshire was a net seller of stocks in the first quarter
Berkshire recently reported its first-quarter earnings report. While we’ll have to wait until May 15 to see what specific stocks Berkshire bought and sold in the first quarter of the year (which includes January, February, and March), we can see from Berkshire’s cash-flow statement that the company was a net seller of stocks in the first quarter of the year.
The company sold over $4.6 billion of equities and purchased nearly $3.2 billion.
Image source: The Motley Fool.
Berkshire also continued to hoard cash in the first quarter, growing cash, cash equivalents, and short-term U.S. Treasury bills to over $342 billion. Remember, the first quarter doesn’t include April, when tariff-induced volatility in stocks began. However, the market had begun to struggle in March, and Buffett and his team of investing lieutenants at Berkshire didn’t appear to have viewed it as an opportunity.
Funds or investors who own more than 10% of a company’s outstanding shares must file new transactions within two business days through a 13G filing. They also may need to file a 13D within 10 calendar days of first crossing 5% ownership in a publicly traded company.
Berkshire operates a massive equities portfolio and holds over a 10% position in nine of its holdings. But the company hasn’t filed a 13D or 13G since mid-February, as of this writing, indicating that Berkshire hasn’t yet increased any of its major holdings since then.
It doesn’t sound like Buffett has been buying the dip
At Berkshire’s annual meeting earlier this month, Buffett was asked about the company’s large cash position and why it has been hoarding cash. If Buffett has been buying in April, he certainly didn’t sound like it, based on his response, suggesting that opportunities don’t come around too often:
And every now and then, you’d find something. And occasionally, very occasionally, but it will happen again. I don’t know when. It could be next week. It could be five years off, but it won’t be 50 years off. We will have — we will be bombarded with offerings that we’ll be glad we have the cash for. And it’d be a lot more fun if it would happen tomorrow, but it’s very unlikely to happen tomorrow. Very, very unlikely to happen tomorrow. But it’s not unlikely to happen in five years, and then it gets — the probabilities get higher as you go along.
Based on that sentiment, I don’t think that Buffett and the team at Berkshire bought the dip in April. While the company had plenty of dry powder, Berkshire focuses on long-term investments and doesn’t like to trade based on the news cycle, which seems to be driving the market right now.
Of course, I could be wrong, but there are still lots of concerns about a potential economic downturn. Nobody can predict how the tariff situation will ultimately play out.
A key to Buffett and Berkshire’s impressive performance is their timely withdrawal from the market before major crises. This may be one of those times where they see elevated risk in the market, and are choosing to play it safe for the time being.
Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
