Billionaire investor Warren Buffett is famous for his incredible investment ideas. So, with coronavirus hogging the attention of the social, economic and investment world this year, many must have waited with bated breath for the Oracle of Omaha regarding this issue.
Berkshire Hathaway A shares have returned nearly 21% annually since 1976, more than double the return of the S&P 500′s 10% return over the same time, according to FactSet,
as quoted on CNBC. No wonder, following Warren Buffett’s investing strategies is now everyone’s dream.
No, even Warren Buffett couldn’t win coronavirus fully as his
Berkshire Hathaway ( BRK.B Quick Quote BRK.B - Free Report) incurred nearly $50-billion loss amid the pandemic. Berkshire said it purchased only a net $1.8 billion of stocks in the first quarter. However, he served some messages for the investing world.
Below we highlight Buffett’s suggested alterations in portfolio, so that retail investors can bank on some winning ETF and stock investment strategies.
“World Has Changed for Airlines:” Near-Term Hurdle Expected
Berkshire has offloaded
all $4 billion worth of its airline stocks because of the effect of the coronavirus. Buffett called Berkshire’s recent purchase of roughly 10% of four of the world's largest airlines — including American ( AAL Quick Quote AAL - Free Report) , United ( UAL Quick Quote UAL - Free Report) , Delta ( DAL Quick Quote DAL - Free Report) and Southwest ( LUV Quick Quote LUV - Free Report) — an “ understandable mistake.”
Airlines have been volatile of late. After crashing in the peak of the coronavirus selloff,
U.S. Global Jets ETF (have gained some footing lately upon received the bailout fund, Delta Airlines’ debt offering, Southwest’s moderate earnings and gradual reopening of the economy. JETS Quick Quote JETS - Free Report)
However, if you are still doubtful about the dicey business prospect of airlines in the near term due to the likelihood of a decline in unnecessary travels, stay away of JETS.
Retail REIT Stocks & ETF in Tight Spot
Online shopping activities are enjoying huge demand amid the coronavirus outbreak as these have less to do with human contact and conform to social distancing. Almost the entire world is now working from home and focused on e-commerce.
This will leave a long-lasting adverse impact on retail REITs as well as broad-based commercial or office REIT. Major brick-and-mortar retailers including
Cheesecake Factory ( CAKE Quick Quote CAKE - Free Report) , Subway and H&M missed rent payments in April, and more late payments for May are in the cards.
With the coronavirus pandemic likely to last as long as two years (
per a report), working and shopping distantly will likely to be a new normal. Retail REITs will be particularly impacted from the trend, with mall-based retailers likely to see lackluster sales trend from an economic slowdown. Investors should thus be watchful about the fund Pacer Benchmark Retail Real Estate Sector ETF . RTL Bet on America; Have Faith in S&P 500 Funds
With markets following the course of the coronavirus cases, no one really knows what will happen next. Warren Buffett believes average investors
should buy the broad market for a long period of time instead of having a stock-picking approach. Vanguard S&P 500 ETF VOO and iShares Core S&P 500 ETF ( IVV Quick Quote IVV - Free Report) could be two low-priced options from this investment strategy. Cash is King
Huge cash left with Berkshire Hathaway shows that Buffett is still doubtful about market movement and is not aggressive about stock purchases. Berkshire’s balance sheet at the end of the first quarter hada record
$137.3 billion in cash, up from about $127 billion at the end of the year. It shows the need for cash holding amid this crisis.
Investors can thus bet on a few money-market ETFs that are cash-like. These options are
PIMCO Enhanced Short Maturity Active Exchange-Traded Fund MINT, SPDR Bloomberg Barclays 1-3 Month T-Bill ETF BIL and JPMorgan Ultra-Short Income ETF JPST (read: Invest In These Cash-Like ETFs). Fed’s Unprecedented Policy Move to Work for Bond ETFs
Buffett praised the Fed’s extremely swift and unprecedented policy move amid the coronavirus crisis that stymied the market slide on Mar 23. The Fed announced on Mar 23 that the purchases of Treasury and mortgage securities would be unlimited in nature and that it would buy highly-rated corporate bonds too. The Fed is now also buying some high-yield bonds (read:
All-Out Fed Support: Buy Highly-Rated Corporate Bond ETFs).
As a result, many companies have issued corporate bonds lately.
Boeing ( BA Quick Quote BA - Free Report) , Procter & Gamble ( PG Quick Quote PG - Free Report) and Visa ( V Quick Quote V - Free Report) executed a respective of $25-billion, $5-billion and $4-billion debt deal recently. iShares iBoxx USD Investment Grade Corporate Bond ETF ( LQD Quick Quote LQD - Free Report) has hauled in about $12.7 billion in new assets since Mar 11, bringing its total assets to $46.3 billion. Assets of the ETF ballooned by more than a third during the period (read: ETF Asset Report of Coronavirus-Inflicted April).
LQD is up about 6% past month. Investors can bet on other trending investment-grade corporate bond ETFs like Zacks Rank #2 (Buy)
Vanguard Long-Term Corporate Bond ETF VCLT (up 8.2% past month), iShares Long-Term Corporate Bond ETF IGLB (up 8%) and SPDR Portfolio Long Term Corporate Bond ETF (up 7.4%). SPLB Want key ETF info delivered straight to your inbox?
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