Buffett calls coronavirus outbreak ‘scary’

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Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc, on Monday called the coronavirus outbreak “scary stuff” but said that it was no time to sell stocks despite the threat of a pandemic.

Speaking on CNBC, Buffett said investors with a 10- to 20-year time horizon and focused on companies’ earnings power will fare well in stocks, and that the outbreak has “not changed” his long-term outlook.

“It is scary stuff,” Buffett said. “I don’t think it should affect what you do in stocks.”

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Markets worldwide fell on Monday on concern about how the Covid-19 coronavirus outbreak, which began in China and has spread to countries including Italy, South Korea and Iran, could disrupt supply chains and slow global economic growth.

Buffett, however, said long-term investors should not get caught up in daily headlines, and that Berkshire would “certainly be more inclined” to buy stocks than on Friday.

“If you look at the present situation,” he said, “you get more for your money in stocks than bonds.”

He said this was true though the US economy, while sill strong, had become “a little softer” than it was six months ago.

The economy grew 2.3 percent last year but has experienced slower consumer spending and industrial production.

Buffett spoke two days after Berkshire said operating profit fell 3 percent in 2019 to $23.97 billion, hurt by losses from insurance underwriting, while unrealized gains in Apple Inc and other investments boosted net income to a record $81.42 billion.

Berkshire, based in Omaha, Nebraska, has more than 90 operating businesses including the BNSF railroad, Geico auto insurer and Dairy Queen ice cream, and Buffett said the coronavirus outbreak has affected a significant number.

Many of the roughly 1,000 Dairy Queens in China are closed, while those that are open “aren’t doing any business to speak of,” Buffett said, while Johns Manville insulation and Shaw carpeting have seen supply chain disruptions.

“There’s always trouble coming,” he said. “The real question is where are those businesses going to be in five or 10 years.”

Berkshire’s stock price has trailed the Standard & Poor’s 500 over the last decade, and Buffett said it will not trounce the broader market as it once did, in part reflecting its size and roughly $558 billion market value.

Buffett said Berkshire over the long term is unlikely to be in the top 15 percent or bottom 30 percent of stocks, but will outperform in down markets.

Any long-term outperformance “will be minor, but it will be done in a very very safe manner,” he said.

The S&P 500 and the Dow Jones Industrial Average on Monday suffered their biggest one-day percentage losses in two years after a surge in coronavirus cases outside China fanned worries about the global economic impact of a potential pandemic.

Investors sold riskier assets and rushed to traditionally safer bets such as gold and US Treasuries after countries including Iran, Italy and South Korea reported a rise in virus cases over the weekend even as China eased curbs with no new cases reported in Beijing and other cities.

The benchmark S&P 500, which represents over 44 percent of the market capitalization of all global equities, lost $927 billion of its value on Monday alone and $1.33 trillion since its closing high on Wednesday last week, according to S&P Dow Jones Indices senior analyst Howard Silverblatt.

The S&P and the blue-chip Dow turned negative for the year to date and the Dow dropped more than 1,000 points on the day for only the third time in its history.

The technology-heavy Nasdaq fell 3.71 percent, the biggest daily percentage drop of the three major averages.

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“We’re not likely to make any progress higher until we have evidence the spread of the coronavirus is decelerating,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. – Reuters

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