For keen followers of super successful investor Warren Buffett – he's invested his way to a US$60 billion fortune, give or take a billion or two – there has been an unusual quiet from Buffett's Berkshire Hathaway headquarters in Omaha, Nebraska recently.
The "quiet" I am referring to is the lack of acquisitions done of late. While it's true that Berkshire has been buying some listed equities – according to CNBC, Berkshire's recent filings showed around $650 million had been spent buying more WalMart stock, while stakes in IBM and Verizon were also increased. In the scheme of things given Berkshire's market capitalisation is US$317 billion these acquisitions are relatively insignificant.
Buffett has been fond of saying that he is "hunting elephants" a term he uses to describe looking for very large companies he can buy outright. It has been a long time since a sizable acquisition was made…
So what does all this mean for ASX investors?
Firstly, Buffett appears to be finding it hard to put his ever growing mountain of money to work. He just can't find attractively priced businesses to buy.
Historically Buffett's buying and selling signals have been relatively accurate flags for good and bad times to invest in the market. While an individual investor does have a much wider opportunity set than Buffett, it would appear to be a warning sign that many businesses are fully valued at present.
Secondly, the buying Buffett is doing is focussed on high quality, defensive businesses. Some ASX-listed equivalent businesses could be Woolworths Limited (ASX: WOW), Computershare Limited (ASX: CPU) and Telstra Corporation Ltd (ASX: TLS).
Investors shouldn't feel compelled to be fully invested. There is nothing wrong with holding cash if you can't find anything attractive to buy. If however you must buy something perhaps the safety and defensive, dividend-paying qualities of big blue-chip type stocks are the way to go.
