Warren Buffett’s Berkshire Hathaway bought $1.73 billion of Bank of America stock between July 20 and July 30, bringing its holdings to 1.02 billion shares, worth more than $25 billion. This according to a recent article in Barron’s.
“Buffett’s decision to buy a weak stock is noteworthy when so many others are talking about hedging,” the article notes, adding, “In fact, it’s hard to recall a time when Buffett has not chosen to make major purchases when the market was weak.”
The article reports that the move contrasts sharply with the view of many strategists that are “increasingly dealing with clients wanting to hedge their portfolios,” but adds that most are facing the roadblock of how expensive hedging is. Aside from the expense, it adds, “hedgers have to be right on the timing.”
Buffett’s purchase of BofA stock underscores the notion that it is “arguably better to by fear than to hedge fear,” the article notes, adding that while the stock market may appear to have become a bit “antifragile”, it is difficult to place so much confidence in so many unknowns. “It’s better to focus on stocks,” it says, “which are more knowable.”
Although BofA stock has been down by 29% so far this year, the article concludes by advising investors to remember Buffett’s mantra: “He use weakness to his long-term advantage.”