The S&P 500 dipped by 19% in 2022, but stocks still don’t seem cheap to Charlie Munger, Warren Buffett’s billionaire partner at Berkshire Hathaway.
“In my whole adult life, I have never hoarded cash, waiting for better conditions,” Munger said in an interview in late 2022. “I’ve just invested in the best thing I could find.”
Yet he acknowledged that Berkshire Hathaway is sitting on billions of dollars in cash. The reason isn’t that Buffett and Munger think they can wait for stocks to get even cheaper — the wager known as “timing the market.”
Instead, Munger said bluntly that Berkshire isn’t buying anything “because there’s nothing we can stand buying.”
It’s an amazing statement. Even with a stock market downturn that would presumably result in dozens or hundreds of stocks trading on sale, at bargain-level prices, the world’s most famous value investors aren’t remotely tempted to dive in.
Berkshire Hathaway — and every other major name in finance — is somewhat limited in what it can do. By law, major financial institutions and billionaire investors can’t buy more than 5% of a company without submitting a 13-D filing as a beneficial owner to the Securities and Exchange Commission and all of the headaches that come with it.
This essentially shuts Buffett out of the world of microcap investing — unless Berkshire Hathaway decides to jump through those regulatory hoops. And even if the company chose to do so, and uncovered a 10 times opportunity, the upside would be barely noticeable to Berkshire Hathaway. If a $2 million stake turned into $20 million, that wouldn’t move the needle for a company that collects hundreds of millions of dollars in dividends each year from its stake in Coca-Cola alone.
But for ordinary investors, it’s a different story. The world of startup investing — legally closed to everyday investors for decades — is now open to the masses.
Sensate is one company generating chatter in Silicon Valley after patenting an anti-stress device that’s helped it grow revenue by 363% year-over-year at a time when S&P 500 companies are reporting revenue growth of just 11% on average. With revenue of $2.8 million in 2021, Sensate is the kind of company Buffett and other major financial names can’t claim a meaningful stake in, but for a limited time, everyday investors can invest here.
