The Most Successful Investor In Modern History Is Selling... Here's What It Means For You
Revenue and operating cash flow have been growing steadily. And the US housing market (which drives USG’s fortunes) has also been strong.
Maybe Buffett just didn’t like the company, or management. Who knows. And by itself, the USG sale might not be a big deal.
But let’s go back to what we discussed a few months ago.
As I wrote in February, Buffett’s company reported a record cash balance in its annual report– a massive stockpile of $116 BILLION in cash at the end of 2017… most of it in short-term Treasury Bills.
Moreover, Buffett reported that he hardly bought anything in 2017 either:
“In our search for new stand-alone businesses, the key qualities we seek are durable competitive strengths; able and high-grade management; good returns on the net tangible assets required to operate the business; opportunities for internal growth at attractive returns; and, finally, a sensible purchase price.
That last requirement proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all-time high.”
Buffett’s $116 billion mountain of cash was enough to literally buy any of the 450 largest companies in the United States.
But he didn’t buy a single one. Why? Because they’re all too expensive. Asset prices are far too high.
So… here is the most successful investor in modern history who:
1) Didn’t buy anything in 2017;
2) Is stockpiling a mountain of cash;
3) Is now selling an asset that he would typically hold forever because another company made an absurdly high offer for the business
It’s true that no one rings a bell at the top (or bottom) of any market.
But it seems pretty clear from Buffett’s actions that it might be a good time to take some money off the table and wait patiently for the compelling opportunities yet to come.