Investors look to have embraced the wisdom of the legendary Warren Buffett in yesterday’s trading, which saw the S&P/ASX 200 Index (ASX: XJO) close up 0.5%. That’s the index’s strongest performance so far this month.
The Oracle of Omaha is almost as well known for his golden investment adages as he is for his incredible success in the share markets. Success that’s seen his personal wealth grow to more than US$70 billion (AU$99 billion).
Here are 3 of my favourite Buffett nuggets – all of which Aussie investors look to have taken to heart on Tuesday.
First, embrace what’s boring, think long-term, and ignore the ups and downs.
Second, never overpay for anything.
And third, the best investments provide real world value, not just market value.
Signs of life in travel and real estate share prices
In today’s COVID-19 world, investors have flocked to technology and healthcare shares.
Technology, because many of these companies’ share prices benefit from the huge societal shift in working, shopping and socialising from our homes.
And healthcare because, well, we are talking about a global pandemic here.
Now the best placed shares in both of these sectors should continue to perform well over the mid-term. But it’s some of the most savaged shares in 2 of the most beaten down industries — travel and property — that have started capturing the attention of value investors.
Here are 2 of the standouts.
First, Flight Centre Travel Group Ltd (ASX: FLT). As the largest retailer of travel in Australia, Flight Centre was absolutely smashed following the virtual shutdown of global and even interstate travel. From its 2020 high on 15 January through its 2020 low on 23 April, the Flight Centre share price fell more than 78%.
But with the Flight Centre share price in the basement, August has seen bargain hunters snap up the shares of this company that provides real world value.
Yesterday, Flight Centre’s share price gained 6%. That brought its share price gains in August to more than 18%. In trading today it has given some of those gains back, likely driven by news of a renewed lockdown in Auckland. That’s certainly not good news for the company in the short-term. But if you’re thinking long-term, ignoring the ups and downs and not wanting to overpay for anything (just like Buffett), you may want to consider adding some Flight Centre shares to your portfolio.
Moving onto to the battered real estate sector, the brick-and-mortar retailers – and their landlords – have been among the hardest hit from the social distancing and lockdown measures intended to manage or eliminate the coronavirus.
From 19 February through 19 March, the Shopping Centres Australasia share price fell 35%.
But August has seen a solid turnaround for the REIT’s share price. Yesterday’s 4.1% gain brought the monthly gains for August to 6.5%. But like Flight Centre, the Shopping Centres Australasia share price is down in intraday trade today, also likely impacted by the new coronavirus cases reported across the ditch.
Our pitched battle with this virus isn’t over yet. And this will continue to see shares gain on any good news of vaccines and elimination results and fall on any setbacks.
But again, if you’re thinking long-term, ignoring the ups and downs and looking for shares that provide real world value, the current Shopping Centres Australasia share price could look like a bargain in 2 years’ time.
While on the subject of Buffett truisms…
Is the boom over for big technology shares?
Here’s a good lesson in ignoring daily and weekly price swings.
It seems the NASDAQ-100 (INDEXNASDAQ: NDX) – comprised of the 100 biggest companies on the broader tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) – is under pressure.
This headline from Bloomberg caught my attention this morning: “‘Stay-at-Home’ Safety Trade Unravels With Big Tech Left Behind.”
Here’s an excerpt:
An oddity is occurring as the stock market grinds back to an all-time high: Big tech is getting left behind.
A risk-on rotation rippling across markets has the tech-heavy Nasdaq 100 flirting with a third straight loss — which would be its longest slide since March — as the S&P 500 climbs for an eighth consecutive day and approaches its February record.
Batten the hatches! Man the lifeboats!
We’re talking about 3 days of rather minor losses, down 3.4%.
Highlighting that this is the longest slide since March sounds alarming. But on the flip side, it means the top 100 Nasdaq listed shares (taken together) haven’t lost ground for more than 2 consecutive days since March either.
In fact, the NASDAQ-100 is up 55% since 20 March. And it has gained 23%, year-to-date.
And as far as I can discern, there’s no reason the biggest technology companies can’t see their share prices gain that much or more again over the next 2 years. With some ups and downs along the way, of course.
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Returns as of 6th October 2020
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Apple, and Facebook. The Motley Fool Australia has recommended Alphabet (A shares), Apple, Facebook, and Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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