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Warren Buffett’s decision to divest airline stocks is an unusual move for the long-term focused investor and could be a calculation for index investing, CNBC’s Jim Cramer said Monday.
Shares of US airlines were sold during the trading day when investors learned that the Omaha Oracle said Berkshire Hathaway offloaded its large positions in the United States, Delta, Southwest and the United States due to sold-out travel demand in amidst a coronavirus pandemic.
“For me, that was an affirmation that … this is where you need to go,” said the host of “Mad Money,” pointing to his recommendation of around 100 stocks that can work in this market environment. “Buffett has a long time horizon, some would say too much.”
Buffett’s move, a staunch advocate of investing in low-income index funds, is a notable change for the renowned investor who suggested in 1987 and 2008 that investors should be aggressive on stocks when others are afraid. Buying a net worth can generate a great return when the market recovers.
However, he now doubts about the short-term future. Berkshire Hathaway over the weekend revealed that he lost $ 50 billion in his investments during the tumultuous first quarter.
“You are perfectly willing to lose money in the short term if you think there is a long-term opportunity, but you didn’t.” [get aggressive] with the airlines, “said Cramer.” He acknowledged that the facts have changed, and he rescued the entire group because he knows that these stocks are toxic. “
The stock market ended the trading day green, as investors considered the reopening of the US economy and the faltering relations with China. The Dow Jones collected 26 points, or 0.11%, to close at 23,749.76, and the S&P 500 expanded 0.43% to 2,842.74. The Nasdaq Composite advanced 1.23%.
“I recommend selling” any position in the S&P 500 Index Fund “if the [upward] the streak continues, “Cramer said.
He also said he believes “many investors deny how bad things can be” for some of the most vulnerable companies.
Cramer, on the other hand, has spent the past few weeks advocating that “Mad Money” viewers opt for stock selection on index investing in this uncertain market. The host cautions that a basket of stocks, such as the S&P 500, which is largely representative of large-cap listed companies, compels investors to take high-yield stakes with laggards.
“If you are in individual stocks and they can grow even in tough times, then you should be in better shape than index fund investors who are really caught up holding the bad with the good, because right now there is much more evil than you seem to think Wall Street, “he said.
Buffett, however, continued to express his support for the purchase of a broad long-term stock index fund at the Berkshire annual meeting. He said that people are paying “huge amounts of money” for “advice they really don’t need” through a stockbroker.
“In my opinion, for most people, the best thing to do is to own the S&P 500 index fund,” Buffett said. “If you bet on the United States and hold that position for decades, you would do much better than buying Treasury securities, or much better than following people who tell you” what securities to buy. “
