Buffett is now approaching retirement, with plans to hand over his CEO role to Greg Abel, currently the company's vice-chairman of non-insurance operations, at the end of the year. But this expert investor has remained active in his final months and quarters of leadership. And that means we can take a look at what Buffett's latest portfolio moves say about the market...

Good news for Buffett fans

First, though, here's some good news for all of you Buffett-watchers: Buffett still will be around as chairman, will go into the Berkshire Hathaway office to share ideas with the team, and he's promised to continue communications through an annual Thanksgiving message. So we may hear about Buffett's thoughts on key subjects well into the future.

Now, let's consider Buffett's general investment strategy over time and the moves he's made in recent quarters. Buffett is known for choosing quality companies with solid competitive advantages, or moats, and investing in them for the long term. The billionaire won't jump into the latest trend even if everyone else is doing so -- and even if it's delivering big returns fast. Buffett prefers companies he can count on over time, and this strategy has been a successful one.

One extremely important point is that Buffett favors value stocks, meaning he aims to buy stocks trading for less than what they truly are worth. The idea is that the rest of the investment community eventually will recognize the strengths of these particular companies and buy the shares -- and these stocks then will rise.

So, what has Buffett been doing lately? The billionaire's moves have been very clear: Over the past 12 quarters, he's been a net seller of stocks, and he's built up Berkshire Hathaway's cash position to reach record levels.

BRK.B Cash and Short Term Investments (Quarterly) data by YCharts

Meanwhile, in his 2024 letter to shareholders, Buffett wrote that it's rare to be "knee-deep" in buying opportunities.

Buffett's moves suggest one thing...

This, along with Buffett's focus on value, says something very clear about the market today -- and a key market metric supports this. The S&P 500 Shiller CAPE ratio, a view of stock price in relation to earnings over 10 years, recently reached beyond 39, a level it's only surpassed once before.

S&P 500 Shiller CAPE Ratio data by YCharts

Buffett's actions, supported by this valuation metric, suggest the stock market is expensive and has been so for a while. But, before you make any abrupt investing decisions based on this, it's important to take a deeper look into Buffett's moves. The Oracle of Omaha, as he's often called, hasn't stopped investing. He's still found opportunities -- for example, he picked up shares of UnitedHealth Group in the second quarter and shares of Alphabet in the third quarter.

Both of these stocks were inexpensive at the time, and they continue to be reasonably priced. This shows us that, even if the overall stock market is pricey, investors still may find interesting opportunities.

UNH PE Ratio (Forward) data by YCharts

Now, looking specifically at the Alphabet purchase, we can draw an additional conclusion. Though technology and artificial intelligence (AI) stocks have climbed over the past few years, this doesn't mean that every AI player is expensive. It's important to consider each company individually -- if you don't, you might miss out on a deal today that may become a winner down the road.

So, Buffett's moves over the past several quarters -- from his selling activity to his accumulation of cash -- suggest that today's market is expensive. And the Shiller CAPE ratio confirms this. But Buffett doesn't recommend staying away. Instead, his investing principles ring true in any market environment, including today's: Look for value, and when you find it, buy and hold for the long term.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post What Warren Buffett's latest portfolio moves say about the market appeared first on The Motley Fool Australia.

True to form, Buffett steps in when the stock looks like "damaged goods": Buying quality when the rest of Wall Street is fearful.

Buffett has always had a soft spot for insurance businesses. Besides Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), named insurance operations, GEICO, Chubb, and MedPro are just a few of the insurers already sitting inside his empire. He likes the float, the pricing power, and the long-term compounding potential of the sector.

So if the Oracle of Omaha were shopping on the ASX today, which insurers might catch his eye? Two standouts are Insurance Australia Group Ltd (ASX: IAG) and Steadfast Group Ltd (ASX: SDF).

Insurance Australia Group

IAG is our country's largest general insurer, with well-known brands including NRMA, CGU, and SGIO. The company recently posted a 51% surge in FY25 net profit to $1.36 billion, alongside a double-digit lift in dividends.

Growth was supported by fewer natural disasters, strong investment returns, and solid performance across all divisions. Management also announced the acquisition of RACQ Insurance, which is expected to lift gross written premium growth to around 10% in FY26.

Brokers are watching closely. Macquarie recently had a neutral rating, trimming its 12-month price target slightly to $9.10. Still, with a robust balance sheet, improving margins, and a full-year dividend of 31 cents per share, IAG continues to offer income appeal.

Steadfast Group

Steadfast takes a different angle on the insurance market. Rather than being a direct underwriter, it's the largest general insurance broker network in Australasia, with more than 400 brokerages and agencies under its umbrella.

This model gives the business scale, distribution power, and recurring revenue streams from broker commissions. Recent results have been strong, with gross written premium rising, and Macquarie recently forecasting upside for the share price.

Importantly, Steadfast has consistently grown both earnings and dividends, earning it a reputation as a reliable compounder in the ASX 200. The network effect and capital-light model are traits Buffett himself has often admired in other sectors.

Foolish Takeaway

Buffett's latest move into UnitedHealth reinforces a timeless principle: The right insurers can bounce back from tough periods and deliver powerful long-term returns. But as Buffett continually reminds us, one must be sure of their "circle of competence". 

For ASX investors looking locally, IAG and Steadfast may not have the Buffett seal of approval — but they share some of the characteristics he prizes. 

The post Buffett just bought an insurance stock and these 2 ASX shares stand out appeared first on The Motley Fool Australia.

As 2022 starts to close, it's only natural for investors to start peeking toward 2023. So far in 2022, the indexes have fared pretty miserably, with the Nasdaq-100 down 29% and the S&P 500 down 17%. Which one will have a better 2023?

Let's look at these indexes and their makeups and find out which is more likely to have a better 2023 ahead.

The indexes are highly concentrated on the top

At the top, the indexes have a lot of overlap.

Data source: Slickcharts. Data as of Nov. 19. *Note: Both Alphabet class shares combined.

Data source: Slickcharts. Data as of Nov. 19. *Note: Both Alphabet class shares combined.

As you can see, Apple, Microsoft, Amazon, and Alphabet make up a considerable chunk of these indexes. In the S&P 500, they account for 19.83%. It's basically double for the Nasdaq-100, with that group making up 39.16% of the index. It's pretty straightforward: How these companies do will significantly steer how the overall index does.

While these three are tech-focused, they compete in different markets. Both Apple and Amazon are a good measure of the pulse of the consumer, as their sales are highly affected by consumer sentiment. If inflation cools, and consumers don't need to worry about rising grocery prices or housing costs, they may treat themselves to the latest device.

Alphabet and Microsoft are business-focused, but for different reasons. Alphabet's primary revenue stream is advertising, and many clients have pulled back their spending levels in 2022 due to the uncertain business environment. If the outlook improves, expect this revenue to return. Microsoft's cloud business and Office product suite indicate how willing businesses are to spend on their infrastructure, but Microsoft's consumer product division also indicates how individuals are doing. 

If the consumer gets stronger and business outlook improves, these four will boom. If that's the case, then the Nasdaq-100 will likely have a better year because it is concentrated in companies that will benefit the most. But if 2023 brings an economic recession, the S&P 500's diversity will help it to outperform the Nasdaq-100.

The companies outside the top five are very different

For the S&P 500, when you move out of the top five, the companies become much more diverse.

Data source: Slickcharts. Data as of Nov. 19.

Now, there are industrials, healthcare, and energy sectors represented, giving the index some much-needed balance. Looking at the top 20 reveals even more diversity, with financials, energy, and healthcare rounding the index out.

This is far from the case for the Nasdaq-100.

Data source: Slickcharts. Data as of November 19. Note: Both Alphabet class shares combined.

Besides Pepsi and Costco, these companies are more in the tech sector. But, unlike the S&P 500, it doesn't get much better outside the top 10, with most of the top 20 consisting of chipmakers, communication companies, and software businesses. Now, this probably isn't a surprise because the media often refers to this index as the "tech-heavy Nasdaq."

Still, tech businesses don't do well if the economy is struggling.

Does that mean you should write the Nasdaq-100 off? Absolutely not. Tech stocks tend to do very well in the recovery phases of a recession. Plus, the stock market is forward-looking, and stocks usually tend to do better during a recession than leading up to one.

That last tidbit of information should keep investors in the market, especially now with a recession, or at least an economic slowdown, imminent. However, if you're trying to decide which index to buy, you need to utilize the 2023 outlook. If you think 2023 will be a repeat of 2022, then the S&P 500 is the better choice. On the other hand, if you believe the economy will begin to recover and the Federal Reserve eases its interest rate hikes, then the Nasdaq-100 is the place to be.

One last point: There's nothing wrong with owning both indexes if you don't know what 2023 will bring. Personally, I think this is an intelligent strategy, as it gives investors the upside of recovery and the safety of a balanced investment.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Will the Nasdaq or S&P 500 have a better 2023? appeared first on The Motley Fool Australia.

Countless factors affect stock prices on a daily basis. Some are very broad like global events and macroeconomic trends. Others are more narrow: company-specific news or changes to analyst price targets. But all of those things affect investor sentiment to some degree, making it impossible to predict which direction a stock (or even the broad market) will move in the short term.

You may hear stories about day traders who made a fortune overnight. Well, some lucky people have also become millionaires by playing the lottery, but that doesn't mean you should invest your money in lottery tickets. Several studies have shown the vast majority of day traders actually lose money, and the ones who manage to turn a profit often make less than minimum wage.

Put simply, the best way to make money in the stock market is a long-term investment strategy. For instance, the S&P 500 has produced a positive return 100% of the time over any 20-year window between 1919 and 2021, according to Crestmont Research. That means patient investors who held an S&P 500 index fund for at least two consecutive decades (at any point over the last century) always made money.

Here is one way to benefit from that information.

A simple way to make money in the stock market

The Vanguard S&P 500 ETF (NYSEMKT: IVOO) is a passively managed fund that tracks the performance of the S&P 500, which includes 500 of the largest U.S. companies. That may be less exciting than buying individual stocks, but there are several advantages to this strategy investors should consider.

First, the Vanguard S&P 500 ETF offers instant diversification across all 11 market sectors, and investors get exposure to some of the most valuable brands in the world. For instance, the top 20 holdings include industry-leading names like Apple, Inc. (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc.(NASDAQ: AMZN), The Home Depot, Inc.(NYSE: HD), Mastercard Incorporated(NYSE:MA), Visa Inc. (NYSE: V), UnitedHealth Group (NYSE: UNH), Johnson & Johnson (NYSE: JNJ), Tesla Corp Ltd (NASDAQ: TSLA), Alphabet Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL), and ExxonMobil Corporation (NYSE: XOM).

Second, the Vanguard S&P 500 ETF is cheap and time-efficient. It bears an expense ratio of 0.03%, meaning investors would pay only $1.50 per year in fees on a $5,000 portfolio. Additionally, it requires very little work, because there is no need to research specific companies or stay up to date on financial results. Investors can simply buy the ETF and forget about it.

In short, while it may be boring, buying an S&P 500 index fund is a simple, inexpensive, and time-tested path to making money in the stock market. That's why Warren Buffett has often advocated for this investment strategy.

Third, the Vanguard S&P 500 has generated a total return of 206% over the last decade, which is equivalent to an annualized return of 11.8%. At that pace, $100 invested on a weekly basis would grow into a $1 million portfolio in 28 years, and it would grow into a $2 million portfolio in 34 years.

How I manage my portfolio

An S&P 500 index fund does not have to be your only investment. Personally, I keep a certain percentage of my portfolio in the Vanguard S&P 500 ETF, but I also own dozens of individual growth stocks. I think of the S&P 500 index fund as a sort of safety net, a reliable money maker in the long run.

Of course, nothing is truly guaranteed when it comes to the stock market, but the S&P 500 has undeniably produced a positive return over every rolling 20-year period since 1919. And that knowledge makes me feel comfortable taking a little more risk with my other investments.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post This stock market investment strategy made money 100% of the time over the last century appeared first on The Motley Fool Australia.