AND S & P 500 In the last two years, he has grown in two -core digits, as investors have accumulated in growth stocks and bet on their successes in the surrounding of the lower interest rates. Growth companies generally outweigh when it can be easier to borrow for development and spread, and stronger economic background means that consumers have more money to spend on the products and services of these players.
So, ua Bull marketThere is a reason to buy and retain growth stocks. The gains in the last two years have been fantastic, but they have also resulted in something that is not so great: bigger estimates.
The shares became much more expensive than just a few years ago, reaching record levels. That might lead you to ask yourself if you really need to buy stock today. To help answer the question, let’s turn to one of our favorite market experts, billionaire Warren Buffett and check what he is doing.
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Investors often look at Buffett as he has shown a strong understanding of the stock market in the long run. And this resulted in a market yield. As a president, he helped Berksshire Hathaway Deliver a complex annual increase of nearly 20% over 59 years, compared to 10% profit for the S&P 500. This is thanks to the Buffett investment strategy only in industry and companies it understands, in the long run holds itself and always enters the stock at a reasonable price.
Buffett is perhaps the most famous in the world Investor value – An investor who buys shares when traded below its inner value, with the idea that the rest of the market will eventually recognize the company’s forces and jump on board. And this will push the shares more, bringing gains to those who received it at a good price.
When it comes to value, it leads me to the current market situation. The S&P 500, as mentioned, has climbed in the last two years, even through the early weeks of this year, although he has slipped the index since mid -February. Investors are concerned about uncertainty, such as consumer consumption and the influence of Tariff of President Trump on imports from countries like China and Mexico.
Meanwhile, as the shares have progressed, so do they have estimates. A large measure to be taken into account is the S&P 500 Shiller Cape (cyclically adapted price and earnings) because it takes into account shares and earning prices for a 10-year period to explain economic fluctuations. Today, this measure has done something that has only been done twice since the S&P 500 was launched as an index of 500 companies in the late 1950s: it surpassed the 37 level, which suggests that the supplies are currently particularly expensive.
Let’s consider how Buffett manages the situation. Last year, this best investor was not a buyer of shares, but a net seller. His net sales amounted to $ 134 billion and included the sale of some of his biggest stakes, such as Apple and Bank of Americain which he reduced the share by 67%and 34%.
This helped Berksshire Hathaway to build a record cash position more than $ 334 billion. In his recent letter to the shareholders, the billionaire wrote: “Often nothing seems convincing; very We rarely find ourselves on occasions. “
Considering Buffett’s recent moves, it is clear that he did not find himself on opportunities last year. And knowing the interest of the billionaire for value, with the market of trading at today’s levels, obviously did not collect in stock.
So, follow Buffett’s steps, should you immediately avoid buying stock? Not necessarily. Just because Buffett did not find abundance options does not mean that he stopped investing in stock. He still watches the market carefully and buys selectively. For example, in the fourth quarter he opened a new position in Constellation brands(Nyse: stz) and increased his position in Domin’s pizza(NASDAQ: DPZ) for more than 86%. Both companies trade lower estimates than earnings forward than a year ago.
This shows that solid buying opportunities still exist, even if the market as a whole remains expensive. Of course, like Buffett, in moments like it is today, you may not find in stocks like hot cakes because of the big estimates of many. But that doesn’t mean you should stop investing and sticking away from the market. If you did, you would miss the investments that could open your way to wealth.
Although Buffett is sometimes extremely careful, he never left the supplies. It is important that he wrote this in his recent shareholder letter: “Despite what some commentators are currently seeing as an extraordinary monetary position in Berksshire, the vast majority of your money remains in capital. That advantage will not change.”
In any market environment, Buffett continues to seek supplies to buy and posture. This has been a winning strategy for him over time, and that could help and stay to achieve a long -term victory.
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Bank of America is an advertising partner Motley Fool Money. Adria Cimino There is no position in any of the shares mentioned. Motley Fool has positions and recommends Apple, Bank of America, Berksshire Hathaway and Domin’s pizza. Motley Fool recommends constellation brands. Motley Fool has disclosure rules.
