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Market Insights

Buffett nails it again!

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The man, the myth, the legend. Warren Buffett’s Berkshire Hathaway revealed their purchase of 14.7 million Activision Blizzard shares in Q4, weeks before Microsoft announced their acquisition of the gaming firm on January 18th.

Activision is the firm behind Call Of Duty, World of Warcraft & Candy Crush among others. The Microsoft acquisition is valued at $75 billion, and widely seen as an avenue for Microsoft to consolidate their position among the top gaming firms in the world.

Microsoft is also positioning for the increase in cloud-computing & the metaverse growth potential.

Activision shares have surged since the announcement in January.

Great trade, right?! Everyone rushed to fill those digital column inches with tales of Buffett’s prowess. One problem… What price did they actually buy at? The Q4 range is wide enough to drive a tank through:

Trading View Activision Blizzard share price one day movement

Buying near the October high of 81.32 would put the firm roughly at breakeven. Buying near the December low of 56.27 would be a phenomenal trade.

According to a Wall Street Journal source, Berkshire bought the Activision shares at an average price of roughly $77 a share. Maybe not such a bargain after all!

We’ll find out more about that on the 26th February when Berkshire Hathaway reports earnings and releases their popular shareholder letter.

Berkshire Hathaway shares are already well in the green for the year as the chart below shows:

Berkshire Hathaway one day share movement graph from Trading View

Will Buffett & co see opportunity in this marketplace? The company has nearly $150bn stacked in the corner ready to snap up any opportunities…

At Berkshire’s May 2021 shareholder meeting, Buffett held up a list of the 20 most valuable companies in the world from 1989. None of them are in the top 20 now, (although some still exist and are doing just fine).

His point?

“1989 was not the dark ages. We were just as sure of ourselves as investors in 1989 as we are today. But the world can change in very, very dramatic ways.”

Never has that been clearer than this pandemic era although it’s too early to say how the changes of these past two years will influence the future.

And when those changes become apparent, Berkshire will be sat with their cash pile ready to pounce on the right deal. And it doesn’t even need to be cheap… One of Buffett’s most famous mantras…

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

Speculation over Buffett’s successors has picked up in recent years. Early in 2021, Berkshire confirmed that Vice Chair Greg Abel would take over if the investing legend was unable to continue. Together with Abel, Ajit Jain, Todd Combs & Ted Weshcler will manage the conglomerate and their investments.

So far, investors have remained sanguine about the prospect of a changing of the guard. Munger said that “Abel will keep the culture” at Berkshire. But which culture?

The culture of big acquisitions that defined the conglomerate in its formative years? Or the recent culture of caution and buybacks?

As always, investors will be on tenterhooks and looking for clues at the next Berkshire Hathaway shareholder meeting on February 26th.

Not investment advice. Past performance does not guarantee or predict future performance.

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