When Berkshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B) reported its March quarter activity, many investors were shocked to see that Warren Buffett had not put more of his massive cash pile to work. Buffett didn’t make any meaningful buys, despite the S&P 500 Index being down as much as 34%. This included Berkshire’s own stock, which had been trading at a price-to-book value below Buffett’s previously touted buy zone of 1.2 times.

Further to this, it was interesting to see that he had sold down certain shares during the recent bear market. Primarily, the mass exodus from the US airlines.

Why didn’t Warren Buffett buy more shares?

No one other than Buffett (or Charlie Munger) will know why Berkshire acted the way it has recently, but here’s my best guess.

1. Buffett is an investor. He thinks and acts for the ultra long term. Short-term volatility may provide buying opportunities, but with an ultra long-term horizon, investing with so much uncertainty means Buffett doesn’t want to make bets he’s not sure of.
2. The share market is future looking, which is why the market has partially bounced back despite the reporting of increasing unemployment. But, there is an argument that the market has recovered out of line with the economy. We do not yet know the full economic impact of COVID-19, or if there will be a second wave. Warren Buffett doesn’t invest in what he doesn’t know or understand.
3. Berkshire performed so well coming out of the Great Recession in part because of the preferential deals and discounted purchases Buffett could make whilst other businesses were distressed. Many of these deals and purchases weren’t made straight away and Buffett is probably hoping to do the same again as the economy emerges from the effects of the pandemic. It is worth noting that between 1987 and 2016, the average time for the S&P/ASX 200 to reach new highs after a correction of 10% or more was over 3 years.

Why did Buffett sell the airlines?

This one is fairly simple. His thesis was broken and he thinks he can redeploy that capital into other ideas or keep it safe in cash.

What ASX investors should do

Retail investors won’t get preferential deals like Buffett. Dollar cost averaging into great shares is a fantastic way to ensure you don’t miss out on discounts.

The ASX is made up of many shares. Some will be cheap and some will be expensive. Be selective and buy quality businesses with strong balance sheets and long-term prospects. Some quality businesses to consider are Treasury Wine Estates Ltd (ASX: TWE), Aristocrat Leisure Limited (ASX: ALL) and Volpara Health Technologies Ltd (ASX: VHT).

More reading

• The ASX 200 just hit an 11-week high. Here are 3 reasons we might be in overvalued territory
• What ASX investors can do before 30 June to save tax
• The ASX 200 stocks in the tax-loss selling firing line
• 2 unbelievable ASX 200 value shares to buy today
• ASX 200 up 1.8%: Big four banks jump higher, Flight Centre and Webjet rocket again

Lloyd Prout owns shares in Aristocrat Leisure Limited and Berkshire Hathaway Inc and expresses his own opinions.. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited and VOLPARA FPO NZ. The Motley Fool Australia has recommended Berkshire Hathaway (B shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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At lunch on Tuesday the S&P/ASX 200 Index (ASX: XJO) looks set to record another strong gain. The benchmark index is currently up 1.8% to 5,716 points.

Here’s what has been happening on the market today:

Big four banks on form again.

The big four banks have continued their positive run and are playing a key role in the ASX 200’s charge higher. All four banks are trading notably higher at lunch as investors pile back into the sector. They appear to believe the banks have been oversold during the pandemic. The best performer in the group today is the Westpac Banking Corp (ASX: WBC) share price with a gain of almost 4%.

Coca Cola Amatil update.

The Coca-Cola Amatil Ltd (ASX: CCL) share price has recovered from a 4% decline and is pushing higher at lunch. This follows the release of a trading update at its annual general meeting this morning. That update revealed that total volume across the company during April declined by approximately 33% compared to the same period last year. And while its volumes have recovered slightly in May, Group Managing Director Alison Watkins warned that conditions could remain tough for a little while to come.

Travel shares taking off again.

Australian travel shares are taking off again on Tuesday. The likes of Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) have followed up particularly strong gains on Monday with more of the same today. At lunch the two travel bookers are up 10% and 9%, respectively. Investors appear excited at the prospect of travel markets recovering quicker than anticipated.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Tuesday has been the Smartgroup Corporation Ltd (ASX: SIQ) share price with a 12% gain. This morning analysts at Morgans upgraded the salary packaging company’s shares to an add rating with a $6.95 price target. The worst performer has been the Fortescue Metals Group Limited (ASX: FMG) share price with a decline of just over 1.5% after iron ore prices softened.

More reading

• The ASX 200 just hit an 11-week high. Here are 3 reasons we might be in overvalued territory
• What ASX investors can do before 30 June to save tax
• The ASX 200 stocks in the tax-loss selling firing line
• 2 unbelievable ASX 200 value shares to buy today
• Why didn’t Warren Buffett buy more shares in the recent bear market?

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post ASX 200 up 1.8%: Big four banks jump higher, Flight Centre and Webjet rocket again appeared first on Motley Fool Australia.

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