Warren Buffett is nervous.His holding company Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has made some amazing deals towards the end of 2020. These movements were not a sign of a bullish person.
There are certain areas of the market that the Guru especially avoids, even if that means selling some of his most important stocks.
Sell these stocks now
The end of last year, Bloomberg I believed that most people had never read the heading “Buffet Inch towards the Wells Fargo Exit”.
Wells Fargo (NYSE: WFC) It has long been regarded as a permanent position in Berkshire Hathaway’s portfolio. It’s been a multi-billion dollar bet for years. Something must be seriously wrong to lower the position.
“Buffet has been praising Wells Fargo for 30 years, making the largest equity investment in the conglomerate and becoming the bank’s largest shareholder,” Bloomberg said. Explanation.. “He overcame the financial crisis of 2008 and showed it at the company’s annual meeting, putting his family on one of the bank’s iconic stagecoaches.”
In 2019, Berkshire owned about 9% of the company. Its ownership figure is now approaching 3%. This is a major move from investors who are famous for their long-term thinking.
But Wells Fargo wasn’t the only financial stock sold by Buffett last year. He also trimmed the positions of other banks. JP Morgan, The stock he praised many times. What’s wrong?
After all, bank stocks are a leveraged bet on the economy. These businesses work well when the economy is strong. If the economy collapses, these stocks can fall by more than 50%. We experienced it first hand during the 2008 financial crisis.
Buffett signals that he is bearish on the 2021 economy, especially by rapidly reducing his position with long-term holdings such as Wells Fargo. He understands that if things get worse, these companies will be the first companies in the chopping block and are reducing exposure in advance.
Buffett also hates these strains
It’s not just bank stocks.Buffett is also nervous about airlines such as: Air Canada (TSX: AC)..
In 2020, Air Canada lost nearly $ 1 billion every 90 days. Looking at this, it has a market capitalization of only $ 7.5 billion. To stop the loss, management created new debt, issued millions of new shares, and sold the plane. These measures are not sustainable forever.
Many believe airline stocks are about to skyrocket as vaccines are underway. Not Buffett. He sold shares in all airlines last summer, and he isn’t ready to return anytime soon.
The problem is classic supply and demand. Demand remains 90% below 2019 levels, but there are still the same number of planes.This discrepancy will cost almost all airlines lose money again In 2021.
“We don’t fund companies that are likely to chew money in the future,” Buffett emphasized.
How to invest now
Buffett’s advice is clear. Avoid economically sensitive stocks such as banks and airlines. He’s not saying that these businesses will fail in 2021, it’s just that the balance between risk and reward isn’t distorted in your favor.
He is still buying other stocks, but these are off the table.
Buffett will be able to buy shares in the 2021 buy list below …
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Motley Fool owns and recommends Berkshire Hathaway (Class B Share) shares and recommends the following options: Call Berkshire Hathaway (B Share) for $ 200. A stupid contributor, Ryan Vanzo, has no position in any of the shares mentioned.
Warren Buffett: These stocks will crash in 2021
https://www.fool.ca/2021/01/23/warren-buffett-these-stocks-will-crash-in-2021/ Warren Buffett: These stocks will crash in 2021