What Buffett can do to fix his portfolio

I must sound like nuts to even think about telling Buffett to fix his portfolio. How dare I ?! But before you laugh at me, first see his performance in the past 15 years:  As of the close of 2019, Buffett had underperformed the S&P 500 over the past 15 years. So it is not so much bizarre to at least think for Buffett what he may consider to do to improve his performance. After all, he is the icon as the living investment God that has countless followers and I know literally there are may people who simply just copy Buffett's portfolio to buy or sell what he is buying or selling. It must have been a great simple strategy during earlier days to follow Buffett in such a way but certainly not in the past 15 years!

As we all know,  Buffett's company, Berkshire Hathaway (BRK -A or -B), is just like a mutual funds as he holds dozens of great stocks for decades that have given him a huge moat with increasing earnings from them. His best part of the portfolio is about those companies he accumulated during his early years like KO, AXP, and many banks and insurance companies that are generating huge growing dividends year in year out. One recent new holding, which is a perfect pick by Buffett and is also the biggest holding for BRK is AAPL. A newly added but a much less weight is AMZN. These are all great stocks to hold. But for some reasons, Buffett has largely changed his investment style in the past 10 years or so to start heavily invest in those companies that are enormously capital dependent with low profit margins. The typical examples are the airliners that is a business that is very difficult to make money but needs a lot of capital input to maintain their operations. Similarly the capital deficient railway business, the privately owned  BNSF Railway, as well as the dying business KHC. In other words, Buffett has moved away from his very successful earlier years core investment strategy but somehow becomes more interested in those businesses with low efficiency but requiring large capital investment. This has become so apparent that even an 8 year old girl has noticed and questioned Buffett at the 2018 annual meeting. In front of 40,000 people, this eight-year-old girl asked investment legend Warren Buffett and his longtime business partner Charlie Munger why they had invested so much in low-return, capital-intensive businesses over the past 20 years, instead of buying great businesses like Buffett had for the first 40 years of his career. Buffett was stumped and had a difficult time to give a good response (Click here to see the video). 

Now along with the sudden unexpected bear market falling onto us, BRK is not immune to the waving of selling. It has lost about 30% of its value as well. But this is definitely the first time Buffett is facing some challenging time.  Over the past 50 years, Berkshire has fallen between 40% and 60% four times. And it has rebounded without fail. In the two years after the dot-com bubble burst, Berkshire soared 77%, while the Nasdaq tumbled 62%. So you can count on a healthy return of BRK shares after this health crisis is overcome. What I think Buffett will most likely be doing in the next few months is to deploy his huge cash pile worth $128 billion to work. Buying back his own stocks is one on the top of the list. Buying more of the existing stocks may also be a likely part of his cash spending. What I really hope Buffett can do is to fix his portfolio buy reducing or even existing those capital intensive stocks and buying or adding more of those capital efficient stocks. What will be a sure way to boost its portfolio performance based on my humble opinion. Of course the chance of expecting him doing this is extremely low as I'm even not sure he has realized his "mistakes" till now. He may even add more money into those poorly performing capital inefficient stocks. That's unfortunate but that's the most likely scenario. Regardless, buying BRK during this crisis is still a good idea as there is zero chance that BRK will fundamentally be damaged by the damn virus. It will survive well and return higher eventually!