Shares of banks have reached a record low recently because of the trade war and worries about the future. Lenders have come to the forefront of investors’ minds following the US’s action to impose 10% tariffs on Chinese-made automobiles, food, and other imports. The trade war among the nations has begun, leaving investors fearful about their money.
Fearing that the fallout of the trade war would affect stocks at all, investors sold off shares of banks. With more than 600 banks trading at less than $60 a share, almost half of them are trading under $10.
One such bank is Wells Fargo. The California lender said earlier this year that it has suffered “substantial costs,” after getting fined $110 million last month. The bank, which is the largest in the US, has also faced fines in the past three years. With the company still tied to dodgy practices, and under a spotlight from regulators, these fines are an increasing threat to the bank’s bottom line. As a result, shares of Wells Fargo, which are down around 30% from their peak last year, have taken another hit.
Meanwhile, shares of the US’s major lenders have taken a tumble, especially small- and mid-sized banks. As a consequence, some investors have come to ponder what a big bank would do in the face of a trade war.
A US giant found interesting stocks
At first glance, shares of Apple, AT&T, and Twitter might not seem like very attractive stocks, given how strong they have been this year. But, now that a big US bank has found these companies, you might want to pay attention. The famous investment fund of Warren Buffett has purchased shares of three other companies on a short-term bet that they would recover.
Investing magnate Warren Buffett and his firm, Berkshire Hathaway, has increased his position in Alphabet (Google’s parent company) and technology giant Facebook. It also boosted its stake in Apple. Last month, the two firms reported financial results that impressed investors. That followed in the footsteps of big financial institutions such as Wells Fargo and JPMorgan Chase & Co. (JPMC).
As a result, shares of Apple, Facebook, and Alphabet had rallied during the first quarter of 2019.
At the time, Google shares were down 15% year-to-date. Apple and Facebook, which were also down 15% for the year, briefly reached the positive during the first quarter of 2019. Both firms’ stocks have begun to dip and lost some of their early gains.
A short-term bet
Investing mogul Warren Buffett believes that these companies will have some good news in the near future. So, he’s betting on them to make money in the future.
Making such large investments before its fundamentals are established can be a risky bet, but Buffett is comfortable with such investments because these investments are short-term. The investor is taking a bet, betting on the fact that the stocks will grow in value in the near future, and maybe more significantly in the next couple of years. At least, that’s what he believes, believing that a company which has low risk in a large-cap growth stock is one to invest in.
Considering that banks will be hit by the US’s trade war, and given how low their stock prices are right now, one might ask if large banks could be a value in the long run. But Buffett thinks it may be too late to invest in a US bank stock.