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Buffett Now Prefers Cash to Stocks: ETFs to Replicate

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Warren Buffett, the legendary investor and CEO of Berkshire Hathaway (BRK.A - Free Report) , (BRK.B - Free Report) , has preferred cash over stocks right now. This is especially true as Warren Buffett sold about $13.3 billion worth of equities and increased exposure in cash and United States Treasuries in the first quarter. The move signals that the 92-year-old investor is no longer optimistic about U.S. economic growth.

Berkshire’s cash pile rose by $2 billion in the first three months of the year to reach $130.6 billion, its highest level since the end of 2021 (read: Follow Buffett and Munger With These ETFs).

Investors seeking to follow the legendary investor should invest in cash-like ETFs. While there are almost two dozen ETFs in this space, investing in popular ones could be compelling. These are SPDR Bloomberg 1-3 Month T-Bill ETF (BIL - Free Report) , JPMorgan Ultra-Short Income ETF (JPST - Free Report) , iShares Short Treasury Bond ETF (SHV - Free Report) , iShares 0-3 Month Treasury Bond ETF (SGOV - Free Report) and PIMCO Enhanced Short Maturity Active ETF (MINT - Free Report) .

These funds invest in short-term bonds and help investors in keeping aside money for a couple of weeks to a few months with almost no risk.

Why Buffett Prefers Cash Over Stocks

Given the heightened volatility in the stock market, Buffett prefers to hold cash as it allows him to quickly take advantage of investment opportunities when they arise.

At Berkshire’s annual shareholders’ meeting, Buffett said there would have been “catastrophic” consequences if U.S. regulators had not safeguarded deposits at the banks above the $250,000 level covered by federal insurance. “It would start a run on every bank.” He pointed to the opportunities that emerged in the 2008 financial crisis, when Berkshire picked up shares in troubled banks at attractive prices, adding that he expected to get similar calls in the future (read: ETF Strategies to Tide Over the Ongoing Banking Crisis).

Additionally, Buffett sees an “incredible period” for the U.S. economy coming to an end. He expects the “majority of holdings to report lower earnings this year than last year,” citing a very different climate than six months ago. Berkshire is increasingly wary of investing in companies that could be jeopardized by growing geopolitical tensions between the United States and China.

Buffett is pessimistic about the prospect for the car manufacturing industries, pointing out that there were too many global competitors, and that the industry was undergoing a transition to electric vehicles which meant huge capital expenditure. He is also cautious about the streaming business, which remains “challenging.”

ETFs in Focus

SPDR Bloomberg 1-3 Month T-Bill ETF (BIL - Free Report)

SPDR Bloomberg 1-3 Month T-Bill ETF seeks to provide exposure to zero-coupon U.S. Treasury securities that have a remaining maturity of 1-3 months. It follows the Bloomberg 1-3 Month U.S. Treasury Bill Index, holding 19 securities in its basket. Average maturity and adjusted duration come in at 0.14 and 0.13 years, respectively.

SPDR Bloomberg 1-3 Month T-Bill ETF has AUM of $29.6 billion and an average daily volume of 8 million shares. It charges 14 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

JPMorgan Ultra-Short Income ETF (JPST - Free Report)

JPMorgan Ultra-Short Income ETF invests mainly in investment-grade, U.S. dollar-denominated fixed, variable and floating-rate debt. It holds 594 bonds in its basket with an average duration of 0.84 years.

JPMorgan Ultra-Short Income ETF has AUM of $24.8 billion in its asset base while trading in a good volume of around 5 million shares a day. It charges 18 bps in annual fees (read: 4 ETFs Zones to Benefit as Fed Pushes Rate to Above 5%).

iShares Short Treasury Bond ETF (SHV - Free Report)

iShares Short Treasury Bond ETF provides exposure to U.S. Treasury bonds that mature in less than a year. It follows the ICE Short US Treasury Securities Index and holds 21 securities in its basket, with an average maturity of 0.29 years and an effective duration of 0.27 years.

iShares Short Treasury Bond ETF has amassed $23.4 billion in its asset base while trading in a solid volume of 3 million shares a day. It charges 15 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

iShares 0-3 Month Treasury Bond ETF (SGOV - Free Report)

iShares 0-3 Month Treasury Bond ETF offers exposure to U.S. Treasury bonds with remaining maturities less than or equal to three months. iShares 0-3 Month Treasury Bond ETF follows the ICE 0-3 Month US Treasury Securities Index with an average maturity of 0.11 years and an effective duration of 0.10 years.

iShares 0-3 Month Treasury Bond ETF has AUM of $10.1 billion and trades in an average daily volume of 2.4 million shares. SGOV charges 5 bps in annual fees and has a Zacks ETF Rank #3.

PIMCO Enhanced Short Maturity Active ETF (MINT - Free Report)

PIMCO Enhanced Short Maturity Active ETF is actively managed that seeks greater income and total return potential than traditional cash investments in exchange for a modest increase in risk. It primarily invests in short-duration investment-grade debt securities. PIMCO Enhanced Short Maturity Active ETF holds 655 securities in its basket, with effective maturity of 0.27 years and an effective duration of 0.22 years.

PIMCO Enhanced Short Maturity Active ETF has accumulated $8.4 billion in its asset base while trading in a solid volume of around 1 million shares a day. It charges 35 bps in annual fees.

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