Did Warren Buffett predict a stock market correction? And what’s he doing now?

Warren Buffett is probably the most famous investor in the world. 92-year-old has amassed a fortune worth over $100bn – at the end of 2022. So, understandably, many investors hang on every word.

Over the past few weeks, the market has fallen. Stocks, especially financials, experienced a moderate correction.

But has the so-called ‘Oracle of Omaha’ arrived? Let’s take a closer look.

Buffett pulled back

Buffett is the chairman and CEO of Berkshire Hathaway. But there were Q4 results that caught the attention of investors.

So what is it? Yes, between June 30, 2022 and the end of Q4, Berkshire Hathaway’s cash, cash equivalents, and treasury securities increased from $105.4bn to $128.7bn.

This means Buffett increased the company’s cash and treasuries position by $23.3bn over the six-month period. That’s pretty big and some investors see it as a warning.

So does Buffett see a stock market correction coming? It’s all possible, and probably the most likely reason to pull back.

But, also, it is possible that they think there is a better opportunity than owning an existing company.

It is also worth noting that Buffett has always said that he does not want Berkshire Hathaway to be strapped for cash.

What are you doing now?

Well, we don’t know for sure, but we do know about Buffett’s investment strategy – buy value. Multi-billionaires look to buy stocks that trade below book or intrinsic value. And, naturally, these stocks are easier to find in bear markets.

“Bad news is an investor’s best friend. Lets you buy a slice of America’s future at a marked down price“The legendary investor once said.

We also know that Buffett tends to focus on blue-chip stocks. He said he would rather pay a fair price for a big company than a good price for a fair company. That gives us an idea of ​​which company to prefer – Apple, Coca Cola and, recently, west.

So, with stock prices down in many sectors, but especially financial stocks, I would consider Buffett to be the top of his favorite business. Buffett once said that “net shopper” stocks benefit when the stock market goes down.

Can I invest like Buffett?

It’s important to remember that sometimes stock prices fall for good reasons. So I have to make sure I don’t buy junk.

There are several ways we can invest like Buffett. First of all, we need to stay on the quality, but we also need to find out if the stock is undervalued or not.

We can start by looking at short-term metrics such as EV-to-EBITDA, or the price-to-earnings ratio. To be useful, we need to compare stocks in the same sector.

Then there is the discounted cash flow (DCF) model. This calculation can be more challenging, but it also gives us a better idea of ​​the value of the company.

Buffett doesn’t invest in the UK, and I don’t invest at all in the US. So, right now, I’m investing in UK value stocks, and I think Buffett is doing the same in the US.

I mainly focus on financial stocks like Barclays which can be undervalued up to 73%, according to the DCF calculation.