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Is Warren Buffett already planning for the next market crash?

first_img I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Is Warren Buffett already planning for the next market crash? Image source: Getty Images. Simply click below to discover how you can take advantage of this. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Peter Stephens | Friday, 15th January, 2021 Warren Buffett has always held a large amount of cash. However, in 2020, his cash pile reached a record level of around $137bn.Alongside Berkshire Hathaway’s purchase of gold miner Barrick Gold, this suggested to some investors that the Oracle of Omaha was readying himself for the next stock market crash.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…However, subsequent sales of shares in the gold miner and a long history of holding vast amounts of cash indicate Buffett is permanently ready to capitalise on the next market downturn.Following a similar approach could be very worthwhile for all investors. By holding cash, and identifying high-quality companies ahead of a bear market, it’s possible for an investor to use market cycles to their advantage.Warren Buffett’s large cash resourcesBuffett’s likely to hold cash for two main reasons. Firstly, it provides peace of mind. An investor who’s not fully invested is more able to overcome unforeseen financial challenges that would otherwise force them to sell shares. For example, they may lose their job or have unexpected housing repair costs that require immediate access to cash.The second reason to hold cash is to capitalise on market downturns. The stock market is almost inevitably going to experience a major crash over the coming years. After all, its past performance shows the market rally experienced in the second half of 2020 will eventually run out of steam.Some crisis or threat will cause investor sentiment to deteriorate. Inevitably, that will lead to significantly lower stock price valuations.Investors such as Buffett will be in a financial position to capitalise on them. As the 2020 stock market crash showed, the window of opportunity to buy companies at low prices can be relatively short.Identifying high-quality companies ahead of a market crashAs well as following Warren Buffett in holding large amounts of cash, identifying high-quality companies ahead of a market crash could be a sound move. For example, an investor may be able to find a number of businesses that have solid financial positions and competitive advantages. However, they may trade at prices that lack a margin of safety.Keeping tabs on the financial performance and developments of such companies can be a sound move. It will enable an investor to be in a position to understand a business comprehensively. That means they can quickly react to a short-term decline in its share price.This may allow them to buy high-quality companies at low prices. Over the long run, such a strategy can be highly effective in generating market-beating returns.Planning for the next market downturnWarren Buffett appears to be in a constant state of preparedness for the next stock market crash. His large cash position means he can invest quickly and decisively in a market downturn. An investor who puts themselves in the same position through holding cash and identifying high-quality companies today could generate impressive returns in a stock market rally. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. 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