Warren Buffett's Investment Strategy during Market Crashes

Overview

• Warren Buffett, renowned for profiting during market downturns
• Prefers market downturns as they provide more investment opportunities

Historical Strategies

Pre-2000 Dot-Com Bubble

• Market Conditions: Online companies overvalued; market bubble.
• Buffett's Approach:
  • Wholly Owned Businesses: 36.8 billion, 40.1% of portfolio
    • Includes Nebraska Furniture Mart, Geico, See's Candy
  • Cash and Cash Equivalents: 13.5 billion, 15%
    • Prefers short-term treasury bills
  • Equity Securities: 39.7 billion, 44%
    • Major holdings: Coca-Cola, Geico, ABC, Freddie Mac, etc.
  • Large Acquisitions:
    • General Re for $22 billion (1998)
    • NetJets
    • MidAmerican Energy

Pre-2007 Financial Crisis

• Market Conditions: Anticipated economic derailment
• Buffett's Approach:
  • Cash: 37 billion, 22%
  • Wholly Owned Businesses: 55 billion, 32%
  • Stocks: 75 billion, 44%
    • Key stocks: Coca-Cola, Wells Fargo, American Express, Proctor & Gamble
  • Aggressive Involvement:
    • Purchased Pacific Corp, Iscar

During and After 2008 Crash

• Market Perception: Market crash seen as opportunity
• Buffett Bucket Technique: Invest heavily during downturns
• Key Investments:
  • Goldman Sachs preferred stock ($5 billion)
  • General Electric preferred stock ($3 billion)
  • Increased Wells Fargo holdings
  • Acquisitions: IBM, Burlington Northern Santa Fe

Current Strategy and Market Conditions

Present-Day Market

• Challenges: Tariff volatility, AI investment risks, concentrated S&P 500
• Investor Trends:
  • Wealthy investors diversify into art
  • Masterworks as a platform for art investment

Buffett's Strategy Today

• Portfolio Composition:
  • Cash: 32 billion, 41%
    • Prefers not to hold cash but sees market opportunities limited
  • Wholly Owned Businesses: 188 billion, 24%
  • Stocks: 271 million, 35%
    • Major holdings: Apple, American Express, Bank of America, Coca-Cola
• Investment Approach:
  • Minimal stock purchases, possibly not by Buffett himself
  • Strategy may change if stocks become cheaper or a significant acquisition opportunity arises

Conclusion

• Buffett prefers to have money working in decent businesses, but current market conditions make holding cash attractive.
• Continues to wait for strategic opportunities, maintaining a conservative approach amid market uncertainties.