Warren Buffett’s Berkshire Hathaway faces a brutal mix of economic headwinds. It will capitalize on the chaos, experts say

Like many US companies, Warren Buffett’s Berkshire Hathaway faces a painful mix of stubborn inflation, rising interest rates, a looming recession, and a potential credit crunch as banking fears linger.

The famed investor’s company owns a vast array of businesses including Geico, Duracell, and the BNSF Railway. It also holds multibillion-dollar stakes in Apple, Coca-Cola, and other public companies. As a result, its fortunes are closely tied to the wider US economy and the stock market.

Experts say Berkshire’s ample cash reserves, strong brands, and prudent management will enable it to comfortably navigate a harsh economic environment. They also expect Buffett, who took cover during the pandemic crash in early 2020, to once again “be greedy when others are fearful” and scoop up bargains if asset prices tumble.

Says Darren Pollock, portfolio manager at Cheviot Value Management:

“Buffett was cautious in the first half of 2020 because, having large insurance subsidiaries within Berkshire, it was important that liquidity be available for whatever liabilities arose due to Covid. Market turmoil now will be much more plain vanilla, resembling prior periods of market unrest during which Berkshire was able to capitalize on low-priced opportunities.”

“Shareholders who plan on holding Berkshire for years into the future should hope for a near-term bear market in stocks. This would allow for Berkshire to choose between buying back its own stock at an advantageous price, buying shares of other businesses at intelligent prices, or possibly buying entire companies. These three options will eventually speed up the growth in intrinsic value per share at Berkshire.”

“Should bargain opportunities not arise, the company still has plenty of places in which it can invest its capital internally so that it will continue to grow for a very long time. This is the base case for Berkshire but we’re hoping for a turbulent market to produce investment opportunities that will allow the company to plant the seeds for a better-than-base-case future.”

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