The legendary brains behind Berkshire Hathaway’s success are Warren Buffett and his second in command Charlie Munger. When these guys speak, it’s worth listening to. Munger yesterday had a video interview at an investor conference and the Australian Business Review printed this quote regarding the current state of the stock market:
“Some of the valuations we saw in the dot-com boom were higher, but overall I consider this as being even crazier than the dot-com boom, which blew up in 2000.”
He is particularly concerned about U.S. companies trading at over 35 times earnings and the fevered obsession with cryptocurrencies, which he thinks governments should have banned.
It certainly feels like a tumultuous time out there. In the realm of safer harbors, engine company Cummins (CMI) looks to be at a particularly good buy point, having dropped 17% in the last 6 months while keeping their sights firmly on transitioning to green energy propulsion through hydrogen fuel cell technology acquired from Hydrogenics. Zillow (ZG) also entered the buy zone having reduced 60% since the start of the year. It’s time to stay alert and potentially hedge your positions with some of the less speculative companies.
“A great business at a fair price is superior to a fair business at a great price.” -Charlie Munger