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Monday May Have Been Warren Buffett's Worst Day Ever

By Billy Duberstein - Mar 10, 2020 at 8:00AM

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Even you probably outperformed Warren Buffett on Monday. So at least you’ve got that going for you.

No doubt, Warren Buffett is one of the greatest investors of all time. However, that doesn't mean he doesn't make mistakes. Specifically, some have been critical of Buffett's lack of aggression during the past 11-year bull market, piling up $125 billion in cash on the Berkshire Hathaway (BRK.A 3.75%) (BRK.B 4.02%) balance sheet as stocks have soared. However, the recent market plunge is making Buffett's conservatism look very wise indeed.

On the other hand, when you look at what Buffett already owns, unfortunately for Berkshire shareholders, Buffett is concentrated in some of the hardest-hit sectors of the entire market, not only on Monday, but over the past two weeks.

Picture of grinning Warren Buffett.

Image source: The Motley Fool.

An ugly tape for Berkshire

Buffett is famous for concentrating bets in areas in which he has a circle of competence. Unfortunately, outside of Apple (AAPL 2.45%), which remains Berkshire's largest stock holding, that means big bets in large U.S. banks, all the major U.S. airlines, and even some energy exposure to boot. Here are some of Buffett's largest holdings, and how they fared on Monday, March 9.

Holding

Ranking in Berkshire Portfolio, by Size

Percentage Loss on Monday, March 9

Apple (AAPL 2.45%)

1

7.9%

Bank of America (BAC 0.72%)

3

14.7%

American Express (AXP 3.18%)

4

9.2%

Wells Fargo (WFC 7.55%)

5

12.4%

Kraft Heinz (KHC 1.45%)

6

7.95%

JPMorgan Chase (JPM 2.98%)

7

13.6%

US Bancorp (USB 3.94%)

9

14.4%

Delta Airlines (DAL 5.55%)

10

5.2%

Bank of New York Mellon (BK 3.81%)

11

8.2%

Southwest Airlines (LUV 4.98%)

13

4.6%

Goldman Sachs (GS 5.79%)

15

10.4%

General Motors (GM 5.55%)

16

13.9%

United Airlines (UAL 7.54%)

21

10.2%

PNC Financial Services (PNC 4.52%)

23

13.6%

American Airlines (AAL 7.09%)

25

7.6%

Suncor Energy (SU 4.95%)

37

19.3%

Occidental Petroleum (OXY 2.55%)

39

52%

Data source: CNBC.

Not only were most of these numbers extremely ugly, and off by even more than the S&P 500's 7.6% Monday decline, but even the airline stocks, which outperformed on a relative basis on Monday, only did so because they were already down so much over the past two weeks.

Especially brutal were Berkshire's energy positions in Suncor and Occidental, which were down by 19.3% and a stunning 52% on Monday. Berkshire has long had a stake in Suncor but recently invested in Occidental, first through preferred shares in April 2019, and then taking a position in the Occidental equity in the third quarter of 2019. Not only that, but Berkshire added to both positions in the fourth quarter.

Oops.

Occidental was so brutally hit because it had taken on lots of debt to acquire Anadarko Petroleum, a deal that closed last August and that activist investor Carl Icahn criticized.  Now, the potential for a prolonged price war between Russia, Saudi Arabia, and U.S. shale is decimating energy stocks -- especially leveraged ones such as Occidental.

Then in a ripple effect, the banks fell precipitously, not only because they have some exposure to energy loans, but also because of tumbling long-term Treasury rates, which means lower interest income for banks in the near term.

10 Year Treasury Rate Chart

10 Year Treasury Rate data by YCharts

It's just one day

Some may take recent results as evidence of a flaw in Buffett's investment process. However, that's not entirely fair. For one, Buffett is famous for buying stocks and holding them for the long term through ups and downs. While we are definitely in a "down" moment right now, it's especially important in times like these to remember these are just one day's results. And one day doesn't mean much when looking out over the long-term returns of the U.S. stock market.

SPY Chart

SPY data by YCharts

Momma said there'd be days like this

Buffett's record is historic in its long-term success. But as yesterday's results show, even the most heralded investor in the world can have terrible days. 

In fact, Buffett addressed the market sell-off a couple of weeks ago, when it was in its early stages. Unsurprisingly, he didn't mind the losses he was experiencing at all, proclaiming: "That's good for us actually -- we're a net buyer of stocks over time. ... Just like being a net buyer of food -- I expect to buy food the rest of my life, and I hope that food goes down in price tomorrow." 

Meanwhile, investors should take solace that even you probably did better than Buffett did on Monday. But investing isn't about daily paper losses. If you believe in the long-term prospects of your stocks, having big losses over any one day, week, month, or even year doesn't mean you're wrong, it's not a reason to beat yourself up, and it's certainly not a reason to quit investing. Though days like Monday aren't fun, over the long term, stocks on the whole will certainly yield much more than low-yielding Treasuries, provided you pick high-quality stocks at reasonable prices, and hold on for the long-term.

And stock prices got much more reasonable yesterday. 

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Stocks Mentioned

Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$417,401.43 (3.75%) $15,101.43
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$278.28 (4.02%) $10.76
Occidental Petroleum Corporation Stock Quote
Occidental Petroleum Corporation
OXY
$57.52 (2.55%) $1.43
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$32.31 (0.72%) $0.23
Apple Inc. Stock Quote
Apple Inc.
AAPL
$141.66 (2.45%) $3.39
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
JPM
$117.32 (2.98%) $3.40
Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
DAL
$31.20 (5.55%) $1.64
American Express Company Stock Quote
American Express Company
AXP
$146.15 (3.18%) $4.50
Southwest Airlines Co. Stock Quote
Southwest Airlines Co.
LUV
$37.73 (4.98%) $1.79
The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
GS
$302.75 (5.79%) $16.58
Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$40.76 (7.55%) $2.86
United Airlines Holdings, Inc. Stock Quote
United Airlines Holdings, Inc.
UAL
$38.51 (7.54%) $2.70
Suncor Energy Inc. Stock Quote
Suncor Energy Inc.
SU
$34.54 (4.95%) $1.63
General Motors Company Stock Quote
General Motors Company
GM
$34.82 (5.55%) $1.83
The PNC Financial Services Group, Inc. Stock Quote
The PNC Financial Services Group, Inc.
PNC
$162.84 (4.52%) $7.04
U.S. Bancorp Stock Quote
U.S. Bancorp
USB
$47.52 (3.94%) $1.80
The Bank of New York Mellon Corporation Stock Quote
The Bank of New York Mellon Corporation
BK
$43.60 (3.81%) $1.60
American Airlines Group Inc. Stock Quote
American Airlines Group Inc.
AAL
$13.90 (7.09%) $0.92
Kraft Heinz Intermediate Corporation II Stock Quote
Kraft Heinz Intermediate Corporation II
KHC
$38.40 (1.45%) $0.55

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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