- Key industries like manufacturing in China, Japan, and South Korea are on the decline.
- Warren Buffett’s $130 billion cash pile will put Berkshire in a strong position to make big acquisitions.
- The patience of Buffett is starting to pay off for investors.
Manufacturing is slowing down and major economies are being frozen as millions of people have been thrown out of the workforce. The coronavirus has put the global economy at risk of a long-lasting recession, and Warren Buffett ‘s patience is paying off.
Buffett’s Berkshire Hathaway has not made a major acquisition since its $37.2 billion deal for Precision Castparts Corp. in 2017. Having missed out on its bid for a technology company last year, Berkshire has stayed out of the market throughout the last three years.
Coronavirus will put everything at a discount for Buffett and Berkshire
Earlier this month, Berkshire Vice Chairman Charlie Munger told Bloomberg in an interview that the company is becoming more pessimistic in using its cash pile to acquire companies.
We were more optimistic about being able to intelligently use our money elsewhere. We’re gradually getting more pessimistic.
Berkshire likes to use its cash to purchase companies that are deemed undervalued based on their current valuation.
Often, such deals emerge when the stock market begins to enter a correctional phase or a fear hits the market due to unexpected variables, dropping the valuations of businesses.