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Warren Buffett's Market Indicator Exceeds 145%

Oracle of Omaha's conglomerate, Berkshire Hathaway, remains invested in stocks despite markets nearing all-time highs

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Jul 09, 2019
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On July 9, the Tuesday following the Independence Day holiday weekend,

Warren Buffett (Trades, Portfolio)’s market indicator reached 146.1%. Based on this market valuation level, the implied annual market return is -2.2%.

Dow falls from July 3’s all-time high

While the Dow Jones Industrial Average languished at an intraday low of 26,675.55, pressured by 3M Co. (

MMM, Financial), the 30-stock index closed at 26,783.83, approximately 22 points lower than Monday’s close of 26,806.14 and 160 points lower than July 3’s all-time high of 26,943.41. Top Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) holding Apple Inc. (AAPL, Financial) closed at $201.24, up approximately 0.61% from the previous close of $200.02.

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CNBC columnist Fred Imbert said investors are awaiting Federal Reserve Chairman Jerome Powell’s next monetary policy move following last Friday’s stronger-than expected job report, which “raised questions” regarding the current rate policy.

Buffett’s Berkshire remains invested in stocks despite significantly overvalued market

Buffett said the ratio between the Wilshire 5000 full-cap index to the gross domestic product is “probably the best single measure of where valuations stand at any given moment.” As of Tuesday, the full-cap index stands at $30.763 trillion, approximately 1.46 times greater than the last-reported U.S. gross domestic product of $20.16 trillion.

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Despite the significantly overvalued market, Buffett increased his conglomerate’s exposure in stocks to 60% during the March quarter, up 3% from the December 2018 quarter. Berkshire’s top six holdings as of the latest portfolio report are Apple, Bank of America Corp. (

BAC, Financial), Wells Fargo & Co. (WFC, Financial), Coca-Cola Co. (KO, Financial), American Express Co. (AXP, Financial) and The Kraft Heinz Co. (KHC, Financial). The conglomerate’s top 10 holdings represent 79.56% of the total equity portfolio.

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Value screeners identify opportunities for second half of year

Several GuruFocus strategies continue outperforming the index, including the most broadly held portfolio, the undervalued-predictable portfolio and the Buffett-Munger portfolio. Table 1 illustrates the value screener record as of July 9.

Screener

USA

Asia

Europe

Canada

UK/Ireland

Oceania

Latin America

Africa

India

Graham Net-Net

224

587

245

56

60

14

7

14

55

Undervalued Predictable

55

72

119

8

57

5

48

6

10

Buffett-Munger

32

109

69

3

31

0

23

5

42

Greenblatt Magic Formula

4422

13335

6722

526

2373

568

1071

332

3436

Historical Low Price-Sales

45

128

58

0

24

1

25

8

34

Historical Low Price-Book

48

133

62

1

30

3

27

11

24

Peter Lynch Screen

32

62

45

1

21

0

5

2

17

52-week Lows

1295

3461

1824

148

863

86

464

181

1785

52-week Highs

1986

2020

3208

246

1354

225

673

127

409

Table 1

Disclosure: Long 3M.

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