Berkshire Hathaway confirmed that in April it sold its “entire positions” in the four largest carriers – American Airlines Group Inc, Delta Air Lines Inc, Southwest Airlines Co, and United Airlines Holdings Inc, Warren Buffett told investors last weekend.
The legendary investor sold his stake in the “big four” US airlines at a loss in April, going against his own advice. But, it does suggest that investors should not wait, and cut losses at the earliest.
Warren Buffett exited the positions after the coronavirus pandemic which could alter the way airlines function once the lockdown opens. Buffett said he “made a mistake” investing in the sector, which the pandemic has changed “in a very major way” with no fault of the airlines.
Warren Buffett once again showed investors as to how one can cut losses and preserve cash, and one should just build a portfolio based on the investment climate. The investing phenomenon is dynamic in nature and usually changes over a period of time based on prevailing trends, suggest experts.
“There are few cyclical sectors which see ups and downs over the course of the business cycle, and to capitalize from their undervaluation it is imperative to catch the bottom which is technically difficult,” Dinesh Rohira is a Founder & CEO of 5nance.com told Moneycontrol.
“Nevertheless, the long term investor can still capitalize from such valuation gaps of quality names through a staggered investment approach at different price levels and stick to the core fundamentals of investing. The challenges in the economy are likely to persist for an extended period due to the current pandemic which might remain even for 1 or 2 years from now,” he said.
What to buy:
Warren Buffett, a former student of Benjamin Graham, is noted as a legendary value investor. He emphasizes on stocks that are trading at reasonable prices.
Making the job simpler for investors in picking stocks conforming to the values of Buffett, we have taken data from MarketSmith powered by William O’Neil.
The following stocks were filtered with the highest Master Score and RS (Relative Strength) rating. Master Score is a proprietary filter created by MarketSmith that highlights great earnings potential and strong price performance of a stock.
On the other hand, RS rating is a technical tool that is the most popular way to see the market’s top performers. The Relative Strength rating is the result of calculating a stock’s percentage price change over the last 12 months.
A 40 percent weight is assigned to the latest three-month period; the remaining three quarters each receive 20 percent weight. All stocks are arranged in order of greatest price percentage change and assigned a percentile rank from 99 (highest) to 1 (lowest).
The filter is applied to look for companies with long-term past and potential future growth. Of the stocks returned by the screen, Buffett most likely would emphasize on those trading at reasonable prices.
The stocks having a market capitalisation greater than Rs 500 crore and Average Rupee Volume greater than 10,000 crores are considered to filter stocks for the list.
Here are 10 stocks according to the above-mentioned parameters that one should look at (they are filtered based on Market Score). The stocks having market capitalization greater than Rs 500 crore and Average Rupee Volume greater than 10,000 crores are considered to filter stocks for the list:
Honeywell Automation: Master Score 69
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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Published at Thu, 07 May 2020 06:25:14 +0000-Drop airlines! Here are top 10 stocks based on Warren Buffett#39;s investment methodology