Berkshire Hathaway and Other Large Companies Would Bear Brunt of Macro Changes
In a situation like where the world market is low and is swinging wildly, it would appear tempting to bet against large companies which have broad exposure to the economy at home and abroad. But analysts suggest that it would be a mistake to bet against an investor with his level of market poise.
Falling oil prices are having a trickle-down effect through the energy sector and into finance, transportation, and other sectors. The Chinese economy is sending markets across the world into turmoil.
Analyst said one may even think of shorting their stock in such conditions, but they suggest that one should not do this because these concerns aren't valid, but because the upside is just so much greater.
Explaining the entire situation, analysts said, Berkshire CEO Warren Buffett doesn't pay attention to markets day to day as he once said, “Only when you combine sound intellect with emotional discipline do you get rational behavior”.
For Buffet, chaotic macro market changes like we've seen this month are actually opportunities for him to buy the companies which he likes at a cheaper price. It's all about understanding a company's intrinsic value and price, not wild market gyrations from day to day, says Buffet.
At one side, the rest of the world is panicking, while Buffett and Berkshire are still doing their daily work smoothly. The only difference is that the prices they pay will most likely be cheaper.
Berkshire Hathaway wholly owns a huge variety of companies from railroads to insurance companies to jewelry stores. The company also has significant minority ownership in a massive portfolio of equities that include banks, beverage companies, and retailers.
Berkshire's potential downside from a slowdown in its railroad business, or softening consumer demand, is more than compensated for by the massive upside of Warren Buffett, cheap prices, and about $50 billion to work with.
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