In the realm of investing, what’s the difference between Buffett and the rest? The answer is straightforward. He does things differently.
In what ways, you ask. For one, unlike most investors he is not really excited by rallies. He prefers declines. He even coined a famous phrase for this: “Be fearful when others are greedy.”
Scanning the market, are there many greed-inviting stocks right now? You bet. Look at silver, precious metal miners and some tech stocks.
Many are assuming that those fabulous equity returns over 2023-2026 are the “norm”; and that prices will continue to produce these wonderful riches in the next three years.
Alas, trees don’t grow to the sky. Markets have taught us time and again that after prices skyrocketed (to the moon), they inevitably fall back.
Chasing overbought stocks aggressively are thus not recommended these days.
In the FTSE 100, I am starting to see some “momentum fatigue” in those high-flying stocks like Airtel Africa (LSE:AAF).
Prices are trading far above its long-term trends; thus increasing the risk of a reversion to the mean.
Precious metals stocks are too in a steep trajectory (FRES, EDV) and vulnerable to a consolidation.
Even those defence stocks, which are benefitting from increased geopolitical risks, are near-term susceptible to a dip. A test of their former resistance levels, now converted to support, is not to be ruled out.
Overall, watch for some momentum uncertainties in the near term. Gather some spare firepower to buy at lower prices.
