Feeding the myth forces us to keep the forms. Warren Buffett, born in 1930 and known as the Oracle of Omaha, has a salary of $100,000 a year and resides in the same home in the Nebraska city from which his nickname comes, purchased in 1958 for $31,500. Instead, it is one of the greatest fortunes in the world thanks to the so-called value investment, which it applies with discipline through the Berkshire Hathaway firm and which, in a very synthetic way, is characterized by trusting in very long-term solid companies. “Price is what you pay, value is what you get,” is one of the Rolling Stone refrain-like maxims coined by this austere augur of investment. Reinvest your profits, avoid debt and do not dedicate money to projects that are difficult to understand are other of his well-known messages.
Rising interest rates and inflationary pressures are also encouraging this veteran and frugal investor to change his strategy. During the third quarter of the year, according to the Financial Times, he significantly reduced his positions in several American companies, many of them consumer-oriented. He exited UPS, reduced his stake in HP and sold positions in Johnson
And why so much withdrawal? To do the same as a Spanish retiree with Treasury bills: invest in fixed income. In the last quarter, Buffett has started buying short-term public debt, with yields above 5%.
Buffett’s case is a rare bird in a financial world in which more aggressive investors are gaining fame. One of them is Carl Icahn, known for betting on large listed companies and also for buying companies with great publicity fanfare and then selling them at a better price. These days the markets are watching him very closely, but not so much because of his achievements as the wolf of Wall Street as because of the quagmire in which he finds himself.
This 87-year-old activist investor, feared in many companies and known for his campaigns in companies such as McDonalds or Netflix, is going through a bad patch among other things due to the limited success of his bearish bets against those listed in the United States. He has predicted worse stock market performance and the result has been that his investment firm, Icahn Enterprises, has fallen 60% so far this year. His stumble shows that the stock market, which is the investment par excellence in variable income, is not doing bad either.
Another media investor is Catherine Wood, who has become a reference for her unwavering faith in cryptocurrencies. The CEO of ARK Investment Management, who has invested in Meta, Tesla and the chip giants TSMC and Nvidia, is as bold in betting heavily on digital currencies as she is prudent in diversifying her portfolio. She enjoyed the sharp rally in tech stocks during the pandemic and now, with the digital market struggling, she spreads ARK’s investments across five platforms.
Another veteran investment guru, Peter Lynch, made his last major star appearance before the summer in an interview on CNBC to consider that, if a recession comes, it will be “expected and predictable.” The message from this investor, whose legend consists of achieving an average annual profit of 8% for decades, is that perhaps the time has come to take cover slowly, without panic: “We have had 30 recessions and 30 recoveries. There is always something to worry about,” he assures.
The message from the almost octogenarian manager of Fidelity Investments is to pay close attention to the income statement of the companies in which you want to invest, instead of their performance on the stock market. There are two key variables: cash flow and debt. And as a precaution, he indicates, it is advisable to think twice before investing in companies that accumulate a revaluation of more than 50% in a short time.
Buffett’s interest in public debt brings him closer to Bill Gross, co-founder of the management company Pimco, famous for his skill with fixed income. The founder of the firm Janus Capital, now retired, warned in October in a statement to Bloomberg Television that public debt could also be subject to pressure at a time of high public deficits and budgetary tensions. Bought long term it can be risky, warned Gross, who is also remembered for his warnings about Spain at the worst moments of the sovereign debt crisis of the last decade. He went so far as to say that “Greece was a pimple, Portugal a boil and Spain a tumor.”
The Oracle of Omaha is credited with a fortune of more than $120 billion thanks to his prudent, long-term investment philosophy.
