Noteworthy Investors Are Struggling to Find Distress As the Market Rebounds
Despite the volatility in 2020, noteworthy investors haven’t had a chance to deploy their immense capital in blockbuster deals.
Warren Buffett, for example, sold some of his positions instead of adding more or securing a major deal. Berkshire has now completely divested its stake in major American airlines. However, the cash generated from these transactions and decades of cash flow from Berkshire’s various businesses were not redeployed. Buffett’s Berkshire Hathaway had a record $137 billion in cash at the end of March. In his meeting with shareholders last week, the Oracle of Omaha sounded cautious about the road ahead and said “We don’t see anything that attractive,” during the meeting.
“If the greatest investor in my generation can’t figure it out, who am I to be bold?” said Leon Copperman in an email to investors that was leaked to the press. In his email, Cooperman laid out several reasons why the ongoing pandemic and economic crisis could leave a long-term dent in the economy.
Billionaire real estate mogul Sam Zell seems to concur with Cooperman’s thesis. “We’re all going to be permanently scarred by having lived through this,” he told Bloomberg recently. 78-year-old Zell has earned his reputation as a savvy investor by focusing on distressed real estate assets. This time, his $25 billion private-equity fund is focused on distressed corporate debt instead.
Similarly, Oaktree Capital raised a $15 billion fund focused on distressed debt as well. The growing amount of capital focused on corporate debt could indicate that wealthy investors see much more pain and several corporate bankruptcies ahead. A worryingly red flag for the global economy.