Still, safe-haven assets like gold and high-yield bonds are in high demand from investors in both the U.S. market and overseas markets, indicating that investors remain cautious on the short-term trend of the stock market.
Berkshire’s 14% increase in operating profit fueled by the strong performance of Kraft Heinz and its railroad business further expanding the company’s capital led to expectations of more investments by the firm’s fund.
The decision of the conglomerate to not spend its growing capital could stem from its anticipation of a pullback in the stock market, as it may consider the current value of stocks to be too high to enter.
“Recent billions in capital investments in notable mistakes such as IBM, Lubrizol, Precision Castparts and Kraft do not inspire confidence that Buffett & Co. are still at the top of their game,” noted Rolfe.
“Whenever this market pulls back meaningfully, they’ll have a lot of capacity to put cash to work,” said Shanahan.
While the numbers of Berkshire remain positive due to the firm’s cash-generating businesses, analysts remain in doubt whether the firm’s holdout on large deals in this state of the stock market is the right decision.
Buffett and Berkshire possibly see a deeper dip to occur in the stock market as the year’s end approaches, as investors like Peter Cecchini of Cantor Fitzgerald predict an 18% crash in the markets by early 2020.