For Immediate Release
Chicago, IL – April 30, 2021 – Zacks Value Investor is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec. Every week, Tracey will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life. To listen to the podcast, click here:
Should You Buy When Warren Buffett Buys?
Welcome to Episode #234 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks
Value Investor portfolio, shares some of her top value investing tips and stock picks.
The Berkshire Annual Meeting for 2021 will take place on May 1 in Los Angeles.
It will feature two 90 something men: Warren Buffett and Charlie Munger.
Thousands will watch "live" as the event will be streamed on YahooFinance.
There are many value investors who live and breathe every Warren Buffett interview and stock maneuver he makes in the Berkshire Hathaway portfolio.
But should you buy what Buffett buys?
The "Problem" Berkshire Faces in 2021
Berkshire Hathaway is a mega-cap company with a market cap over $600 billion and billions of dollars in cash on hand.
Given its size, Buffett really has no choice when he deploys his cash: he must buy big.
That includes in acquisitions and in the stocks he buys.
For example, two of Berkshire Hathaway's recent stock acquisitions, in the fourth quarter of 2020, were
Verizon ( VZ Quick Quote VZ - Free Report) and Chevron ( CVX Quick Quote CVX - Free Report) .
Verizon has a market cap of $233 billion and Chevron's is $203 billion.
Buying shares in a small or mid-cap oil company such as
Magnolia Oil & Gas ( MGY Quick Quote MGY - Free Report) , which has a market cap of $2.8 billion, is just not going to be feasible for a company as large as Berkshire. Limits on What Buffett Can Do
The sheer size of Berkshire has really put a limit on what Buffett would invest in over the last past 10 to 15 years.
He did manage to buy into some "smaller" companies like
RH ( RH Quick Quote RH - Free Report) , which now has a market cap of $15 billion. It was smaller when he first bought it in 2019.
But RH remains a tiny position in Berkshire, at just 0.29% of the entire portfolio, even as Berkshire is now a 8.49% shareholder of RH.
In prior decades, Buffett might have been a buyer of shares of office and residential furniture maker
Herman Miller ( MLHR Quick Quote MLHR - Free Report) which currently trades with a forward P/E of 13 and pays a dividend yielding 1.9%.
But with a market cap of "just" $2.4 billion, it's too small to bother with.
Yet Buffett owns many quality, cheap large cap stocks that investors might want to consider.
Should investors be buying when Buffett buys?
Find out the answer on this week's podcast.
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