7 Things Warren Buffett Says About the Stock Market

This is what Buffett thinks about Elon Musk.

Berkshire Hathaway (ticker: BRK.A, BRK.B) CEO and legendary investor Warren Buffett has always been generous in sharing his time and his investing philosophy. In a pair of recent interviews with CNBC, Buffett discussed a range of important market topics. For decades, Buffett’s long-term value investing approach has consistently outperformed the S&P 500. Even during the past five years, when many value stocks and investors have lagged the market, Berkshire’s 88.5 percent overall gain has outshined the 72.4 percent gain of the S&P 500. Here are seven things investors have learned from Buffett lately.

Stocks are expensive.

When Buffett was asked if U.S. stocks are expensive, Buffett said frankly that American stocks are “definitely” pricey at the moment. Buffett said there’s simply no reliable way of predicting whether stock prices will go up or down over the next week or year, but stocks with high returns on capital will always eventually outperform bonds returning just 3 percent annually. “If you had your choice between buying and holding a 30-year bond for 30 years or holding a basket of American stocks, there’s just no question you’re going to do better owning stocks,” Buffett says.

Berkshire buybacks are not a guarantee.

Berkshire currently has more than $100 billion in cash on its balance sheet. In the past, Buffett has said that he would only buy back Berkshire Hathaway stock if the share price was at or below 120 percent of book value. Buffett said he uses intrinsic book value as a gauge rather than book value, and Berkshire has been buying back a limited number of Berkshire shares as of late. “We need a big enough discount, so we’re buying it at what we know is a price where the continuing shareholders are going to be better off,” Buffett says.

Buffett still loves Apple.

Buffett’s most aggressive investment in recent years has been a $56 billion stake in Apple (AAPL), which is now Berkshire’s largest holding. Buffett owns more than 5 percent of Apple, but he’s still buying more. When asked if he’s been adding to his Apple stake since the end of the second quarter, Buffet said he’s been selectively adding to his Apple holdings. “I bought just a little bit,” he said. “I like to buy them cheaper.” Since Berkshire first began buying AAPL stock in 2016 at around $100, the stock is up about 129 percent.

He’s maxed out on airlines.

Buffett raised some eyebrows on Wall Street when Berkshire accumulated roughly 10 percent ownership stakes in Delta Air Lines (DAL), American Airlines Group (AAL), United Continental Holdings (UAL) and Southwest Airlines Co. (LUV). Some analysts have speculated that Buffett may be considering a full buyout of Southwest or another airline. However, Buffett said he has maxed out his airline investment and gave no hints at a bigger deal down the road. “I would have been happy to buy 20 percent [of the four airline stocks], but we’ve got about what we can handle,” he says.

Another financial crisis is coming.

There have been several measures implemented in Washington and on Wall Street since the last financial crisis to help protect financial markets from disaster, but Buffett said another crisis is inevitable simply due to human nature. He said Americans feel a tremendous amount of pressure during financial bubbles because bubbles make it seem as if making huge amounts of money is easy. “The guy next door, who they know is dumber than they are, is getting rich, and they aren’t,” Buffett says. He says that contagious type of thinking is never going away, and neither are financial crises.

He doesn’t support Trump’s biannual report plan.

President Donald Trump has proposed that U.S. companies might benefit from shifting from quarterly financial reporting to reporting once every six months. Trump has even ordered the U.S. Securities and Exchange Commission to investigate the potential impact of shifting to a six-month reporting schedule. Buffett and JPMorgan Chase & Co. (JPM) CEO Jamie Dimo have previously spoken out in opposition to companies issuing quarterly guidance, but Buffett said he is opposed to eliminating quarterly earnings reports. “I like to read quarterly reports as an investor, and we’ve got a couple hundred billion dollars worth of common stocks,” Buffett says.

He has advice for Elon Musk.

Tesla (TSLA) CEO Elon Musk’s use of Twitter, including his infamous tweet that he had “funding secured” for a deal to take Tesla private, recently cost Musk his position as Tesla chairman. Buffett says Musk’s tweeting is clearly not helping his cause and explains why he mostly stays off Twitter (TWTR). “It’d be particularly dangerous to start commenting on Berkshire daily, which I never would do.” Buffett says he has better things to do with his time than tweeting and said investors who want to get his opinion on Berkshire should read his annual shareholder letter.

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