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Investors around the world have tried to adjust their portfolios to deal with the big Federal Reserve interest rate hikes, European Central Bank, Bank of England and other central banks this year. But Warren Buffett has no reason to worry.
It looks like the Oracle of Omaha will have the last word This year. Buffett’s Berkshire Hathaway shares
(BRKB) are up around 5.5% in 2022. S&P500 fell more than 15%.
Buffett was helped by the fact that Berkshire has a big stake in the oil company Chevron
(CLC), which is the best title of the Dow Jones this year with a gain of nearly 50%. Berkshire also owns a huge part of Occidental Petroleum
(OXY)which more than doubled…making it the biggest gainer in the S&P 500.
Oil stocks soared thanks to rising crude oil prices.
Buffett’s affinity for heavy consumer stocks has also served him well in 2022. Berkshire has big stakes in Coca-Cola
(NOPE) and Kraft Heinz
(CC)which are each up about 10% this year.
Berkshire Hathaway, a massive conglomerate that owns businesses ranging from Geico and the Burlington Northern Santa Fe Railroad to consumer brands like Dairy Queen, Fruit of the Loom and Duracell, also held up relatively well in a tumultuous year. for the economy and the markets.
The company has released a net loss in the first three quarters of 2022 due to the decline in value of other major investments such as Apple
(AAPL)Bank of America
(LAC) and other financial stocks, but Berkshire Hathaway’s actual business units are doing very well.
Berkshire Hathaway’s operating profit — the metric that Buffett and Wall Street analysts prefer to use as an indicator of the company’s health — rose nearly 20% to $24.1 billion during the of the first nine months of the year.
Can Buffett and Berkshire start again in 2023? Further challenges lie ahead as oil prices fall and inflation peaks. It could hurt Berkshire’s huge energy and utility companies. Higher interest rates could also continue to hurt Berkshire’s banking investments.
Investors will also be looking for Buffett’s lieutenants to be more public about how they plan to lead the company in a possible post-Buffett world. Buffett turns 93 next August while Berkshire vice-chairman and longtime Buffett confidant Charlie Munger celebrates his 99th birthday on New Year’s Day.
So it’s fair to wonder how much longer the Warren and Charlie show will last. Fortunately for Berkshire investors, a succession plan is in place. Vice-president Greg Abel will eventually become CEO of Berkshire while Buffett’s investment gurus Ted Weschler and Todd Combs will manage the portfolio.
Berkshire has taken advantage of the market turbulence this year to do some good business. Taiwan semiconductor
(TSM) is the last example. Berkshire also continued to buy back its own shares. But many corporate executives don’t seem as eager to buy this year’s drop.
According to research by VerityData, only about 5,000 members of management teams have bought stock in their own companies so far this year. That’s down from around 6,500 insiders during the Covid bear market in 2020.
It’s also well below the number of insiders who bought shares of their companies during the Great Recession of 2008 and 2009, the debt ceiling debacle of 2011 that led to the US credit downgrade and jitters of the 2016 pre-election market.
It could be a bad sign. If CEOs and other C-suite executives aren’t so confident of a market rebound, should you be?
The lack of insider buying is even more telling when you consider that top CEOs like JPMorgan Chase
(JMP) Jamie Dimon and David Solomon of Goldman Sachs
(GS) have also been making cautious comments about the economy lately.
But Ben Silverman, director of research at VerityData, warns investors not to worry too much. That’s because insiders aren’t selling a lot of stocks either.
“There seems to be this insider reluctance to call a market bottom,” Silverman said. “But insiders also don’t sell or turn stock-based compensation into cash. Many insiders do this regularly. They seem ready to hold on but not to put more skin in the game.
So CEOs and other corporate insiders may choose to be cautious. They really don’t know where the market and the economy are going, just like the rest of us.
The stock market turmoil of 2022 is like a fleeting downpour compared to the storm raging in crypto circles.
Although bitcoin prices rebounded somewhat recently after a dismal November, there are still concerns about the health of other crypto giants, such as Coinbaseafter The collapse of FTX and the arrest of its founder Sam Bankman-Fried.
As my colleague Michelle Toh reports, there are now concerns about big withdrawals from FTX rival Binancewho at some point considered buying/saving FTX before change one’s mind.
CNN’s Matt Egan also notes that there are increasingly bipartisan support in Washington for sweeping regulatory changes in the crypto industry. Democratic Senator Elizabeth Warren has introduced a bill with Republican Senator Roger Marshall that would crack down on money laundering in the crypto world.