Warren is sitting on $128 billion, raising questions whether the market is overvalued

[cyclone]

Warren Buffett is sitting on $128 billion, raising questions about whether the market is overvalued
* The forward price-to-earnings ratio for the S&P 500 has climbed to levels last seen around December’s monster sell-off.
* The S&P 500 is also trading at about 2.14 times sales estimates for the next 12 months.
* The last time the market reached such a high price-sales multiple was in September 2018 when a big sell-off began and in the first quarter of 2000 just before the tech bubble burst.

Yun Li
PUBLISHED FRI, NOV 29 201910:58 AM EST
UPDATED FRI, NOV 29 20192:08 PM EST

Despite having $128 billion to burn, Warren Buffett just backed out of a bidding war after a slightly higher offer topped Berkshire Hathaway’s.

If the Oracle of Omaha is that shy to just spend a tad more of his giant cash pile, could that be saying something about the stock market’s overall valuation?

Last week, the Berkshire chairman and CEO bid $140 a share, or just over $5 billion, for Tech Data, a hot technology distributor, according to an exclusive report Friday from CNBC’s Becky Quick. Then private-equity giant Apollo Global Management then sweetened its initial bid to $145 a share, or $5.14 billion.

Buffett then bowed out.

Little is cheap in the market right now as stocks’ record run this year has driven multiples higher across the board and lifted most stocks.

“Prices are sky-high for businesses possessing decent long-term prospects,” Buffett said in the most recent annual letter. He has repeatedly said the premium for buying companies outright has gotten too rich for his liking partly due to competition from private-equity companies.

The S&P 500 is up 25% this year, on pace for its best annual performance since 2013. An impressive rally this quarter has pushed stocks to all-time highs amid optimism on a U.S.-China trade deal and receding fears of recession.

‘Almost unprecedented’

The forward price-to-earnings ratio for the S&P 500, the most common indicator for market valuation that measures current share price relative to per-share earnings estimates for the next 12 months, has climbed to levels last seen around December’s monster sell-off.



“U.S. equities remain highly overvalued relative to non-U.S. equities,” Lori Calvasina, head of U.S. equity strategy at RBC, said in a note Wednesday. “We aren’t looking for much multiple expansion in 2020.”

The S&P 500 is also trading at about 2.14 times sales estimates for the next 12 months. The only times the market reached such multiple was September 2018 when the sell-off began and in the first quarter of 2000 just before the tech bubble burst.



More details in https://www.cnbc.com/2019/11/29/buffett-...ation.html

[dreamybear]

I am surprised WB wld bid an all time high share price. While I did not study Tech Data(TECD)'s financials, even if assuming TECD is on a revenue / profit growth trend through the years, it is not exactly "cheap" at ard 15x PE. Moreover, with the impending US presidential elections, ongoing trade wars, Brexit, issues in the EU, he must be very confident of the company's prospects to make a bid like that.

[weijian]

I am surprised WB wld bid an all time high share price. While I did not study Tech Data(TECD)'s financials, even if assuming TECD is on a revenue / profit growth trend through the years, it is not exactly "cheap" at ard 15x PE. Moreover, with the impending US presidential elections, ongoing trade wars, Brexit, issues in the EU, he must be very confident of the company's prospects to make a bid like that.

IMHO, all of us (from the big boys to the small OPMI like me/you) have different asset allocation - You can't really try fitting a round peg into the square hole. And WB is now more of Philip Fisher than Benjamin Graham. Finally, if we really have read enough of his stuff, one probably knows that he is long term positive on US and the company fundamentals triumphs over the macro situation most of the time....But one thing is for sure - he doesn't like crowded trades.

To be honest, i think the people publishing such news are just trying to find some event to reinforce the "all time high" narrative and continue to publish news to attract attention/stay relevant.