The Wizards of Wall Street: What Are Buffett and Soros Buying Now?
Investors headed for the exits on Tuesday, as they fretted over nuclear tensions with North Korea, a new session of Congress that already resembles a preschool romper room, and another massive hurricane barreling toward the U.S. mainland.
Also on Tuesday, President Trump threw a new burden onto lawmakers’ already overloaded agenda by rescinding protections for immigrant children and asking Congress to act. When it comes to getting a comprehensive tax bill passed this year, Wall Street has collectively thrown up its hands in exasperation.
All three major benchmarks on Tuesday racked up their worst one-session drop since August 17. The Dow Jones Industrial Average closed the day down 1.07%, the S&P 500 fell 0.75%, and the Nasdaq posted a 1% loss.
What’s an investor to do? Well, now’s a good time to see what Warren Buffett and George Soros have been up to.
In these turbulent conditions, you should implement proactive measures for portfolio protection. By the same token, it’s a mistake to adopt a defeatist attitude and walk away from the table. With the right information and a hands-on stance, you can beat the market whether it’s up, down or on a roller coaster.
Buffett and Soros don’t rely on gut instincts, hunches or raw emotions. These billionaire super investors didn’t get rich by being timid (or by rolling the dice). They apply time-tested empirical data to cold, hard reality. And that’s how they find hidden value.
Below, I provide you with guidance for volatile times, by examining a few notable investments recently made by Buffett and Soros.
Buffett’s net worth currently stands at $77.6 billion; Soros’ at $25.2 billion. It’s safe to say that it pays to follow their lead.
The Billionaire Buyers Club
Let’s examine a few salient examples of how these two money masters deployed their ample hoards of cash in the latter half of 2017.
Buffett didn’t inherit a real estate empire from his father, as did Donald Trump. Nor did Buffett line his pockets by creating a state-run kleptocracy, as did Russian President Vladimir Putin. Buffett isn’t a technology genius like Bill Gates nor is he a marketing visionary like the late Steve Jobs.
Warren Buffett, the fourth wealthiest man in the world, amassed his fortune the old-fashioned way. He buys stock.
The Oracle of Omaha’s investment vehicle Berkshire Hathaway (NYSE: BRK-A) recently made huge bets on airline stocks, which surprised Wall Street. In the past, Buffett has disdained airlines because of their weak cost structures and thin profit margins. But today, the aviation industry is experiencing a global renaissance, as continued economic growth and rising consumer confidence in the U.S. drive travel and tourism.
An ascendant middle class in emerging markets is demanding “the good life” that it sees in the West and part of this conspicuous consumption includes tourism. At the same time, the major airlines have gotten a handle on their costs and they’re enjoying the benefits of lower energy prices.
Berkshire in recent quarters has cumulatively plowed $2.1 billion into buying shares of American Airlines (NSDQ: AAL), $2.2 billion in United Continental Holdings (NYSE: UAL), $2.4 billion in Southwest (NYSE: LUV), and $3 billion in Delta Air Lines (NYSE: DAL).
Booming travel demand in regions such as Asia will continue this year, regardless of the vacillating fortunes of specific national economies or occasional hiccups among U.S. economic indicators. Global economic growth in the second quarter of 2017 was not only robust but also “synchronized,” meaning that prosperity was roughly shared by all regions.
Buffett’s airline bets are high-quality, low-debt operators with valuable routes, improved cost structures, and earnings growth momentum.
Buffett also renewed his love affair with Apple (NSDQ: AAPL). He has steadfastly stuck with Apple, even when earlier this year the Cupertino consumer icon was struggling and out of favor. Buffett this year has doubled his stake in Apple, which now approximates $17 billion worth of the tech behemoth’s stock. True to his homespun style, Buffett doesn’t own an iPhone. Nonetheless, Apple’s imminent release of its iPhone 8 should further boost shares, which have already risen more than 41% year to date.
Born in Hungary, Soros is known as “The Man Who Broke The Bank of England” because of his short sale of $10 billion worth of British pounds, generating him a profit of $1 billion during the 1992 Black Wednesday currency crisis in Britain. A survivor of Nazi Germany and a supporter of philanthropic causes, Soros is the 19th richest person in the world. He’s the founder and driving force behind Soros Fund Management LLC, a private American investment management firm.
Two of Soros’ recent stock purchases for his management firm stand out as plays on accelerating trends: the need for clean water and the boom in housing and construction.
American Water Works (NYSE: AWK)
Societies around the world are increasingly bedeviled by a global water crisis, spawned by climate change, worsening pollution, overpopulation, poor agricultural practices, and the woefully inadequate funding of environmental agencies.
Climate change is exacerbating pollution and extreme weather, which in turn threatens natural water supplies. Even if you don’t believe in the existence of global warming, companies that specialize in producing fresh water are becoming “liquid gold” for investors.
The devastation in Texas wreaked by Hurricane Harvey only underscores the growing threat to potable water. As if Harvey weren’t bad enough, Hurricane Irma this week became a Category 5 storm and it’s making its way to Florida.
With a market cap of $14.37 billion, American Water Works provides water and wastewater services in the U.S. and Canada. The average analyst expectation is that AWK’s year-over-year earnings growth will come in at 7.03% over the next five years on an annualized basis. The current dividend yield is 2.05% and the stock has risen nearly 12% year to date.
Stanley Black & Decker (NYSE: SWK)
For most Americans, homeownership is their greatest financial asset. As home prices rise, they’re increasingly inclined to view their homes as not just places to live but also investments worthy of repair and upgrading.
With these tailwinds at its back, one stock is about to raise the roof: toolmaker Stanley Black & Decker (market cap: $21.7 billion). Demand for the company’s products has been picking up over the past year in both the wholesale and retail arenas, as the company benefits from the upward trajectory of the do-it-yourself market.
Stroll down the aisle of any Big Box hardware store and the bold orange-and-black logos of Stanley Black & Decker’s products are pervasive. The company manufactures tools and accessories, engineered fastening systems, security solutions, and more.
The average analyst expectation is that SWK’s year-over-year earnings growth will come in at 10.65% over the next five years on an annualized basis. The current dividend yield is 1.77% and the stock has risen nearly 24% year to date.
The above equities are just a few instructive and timely examples from the many holdings in the portfolios of Buffett and Soros. These stocks will not only build wealth over the long haul but they also should weather the market downturn that seems to be in the cards. As Buffett once said: “Predicting rain doesn’t count. Building arks does.”