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Third, Berkshire has plenty of dry powder remaining. Prior to the purchase earlier this month, the company was sitting on a mountain of cash-around US$137 billion. If you are an indexer and want to buy stocks, this seems crazy. But just like he poured assets into cheap stocks in 1974 and again in 2000 when the market collapsed about 40 per cent, as well as during the 50 per cent collapse in the Great Financial Crisis of 2008, we believe that cash will be deployed once Buffett is able to find a few large bargains.

Fourth, the stock is cheap. Berkshire is now trading near book value, something we have not seen since the financial crisis. This is likely as cheap as it gets for a company which generated more than US$20 Billion of free cash flow in 2019.

The stock is especially cheap when you factor in that almost the entire gain in the market value of Berkshire since the S&P 500 bottomed in March can be attributed to the extraordinary gain derived from its Apple Inc. holding. Taking out the appreciation of its Apple shares, the value of BRK is virtually unchanged since mid-March, while the market has rallied nearly 50 per cent.

Fifth, based on regulatory filings in recent months, it appears that Berkshire has bought back a significant amount of stock in the past two to three months.

Lastly, the company remains predictable, and focused on capital preservation. Buffett, and those that follow him in managing Berkshire, will continue on the path that Warren and Charlie have laid out: find companies with sustainable competitive advantages, repeatable earnings models, room for growth, significant free cash flow, and great management teams at the helm. And if they can’t find such companies at attractive prices, they will wait.

When the crowd starts thinking that one of the greatest minds in the world has lost it, all you have to do is look back at his historical successes, which include his non-actions, as he waits for exactly what he wants.

What’s required for investors, which Buffett has demonstrated repeatedly, is the virtue of patience. As noted above, every time, that has rewarded shareholders handsomely. We believe he (and us as well) will have that wonderful opportunity.

Larry Sarbit is a portfolio manager atValue Partners Investments in Winnipeg. He can be reached at[email protected].