Since the coronavirus pandemic struck the earth, the world’s economic sector has not been doing well. This is seen especially in the stock market that has been experiencing fluctuations since March. As the United States was planning to reopen the economy, Wall Street recorded a significant market rally. This slight rise was due to various factors, such as the stimulus package and optimism of the coronavirus’s effective vaccine.
Investors have also been so uncertain about their investment in the stock market. One of the investors is Warren Buffett, who sold his airline stocks due to the pandemic’s uncertainty. Day traders criticized Buffet and even claimed that he is out of the game since he has not made any outstanding investment since 2016. However, the billionaire has inked a new deal with the Dominion Energy despite critics still speaking on the original investment. Berkshire Hathaway paid over $9 billion for a gas pipeline network from the Dominion Energy firm.
The Stock Market: dominion energy
Dominion is an American energy and power firm in Virginia. It provides electricity in Virginia and Carolina. Besides, the firm provides natural gas to Utah, West Virginia, Ohio, Pennsylvania, Carolina, and Georgia, Atlanta. Dominion Energy obtained Questar gas in the Western part of the US, including regions of Wyoming and Utah. Last year, the company finished its acquisition process of the SCANA Corporation.
The Opinion of traders Concerning the New Deal
Some stock market traders view the contract or deal as proof that Warren Buffett is going to be bullish in the market. However, this might not be the case. A bullish person is a speculator in the stock market who predicts that the stock market prices may increase and sell them to get profits.
Reasons Why the Deal isn’t a Signal Buffet is Going Bullish
Views of different experts are that the deal brings out the idea that Buffet believes the market undervalues the stocks. This theory promotes grip on Wall Street, and experts say the cash piles put aside or at the sidelines could move towards the market. Bearing in mind, story stocks are making big steps, and there might be a FOMO in the stock market that could increase the stock valuations in the short term.
FOMO means fear of missing out. It is the anxiety that an interesting event may be occurring elsewhere. On the other hand, story stocks are stocks in which experts give a long explanation to investors to encourage them to purchase it.
The State of the Bulls following this Deal
During the past years, when the conglomerate was inactive, it accumulated stockpile cash that was over $130 billion. Buying a Dominion natural gas pipeline in cash would only act for about 7% of the firm’s money. This deal includes a $5.7 billion of debt, reducing the out of pocket expense to over $3.5 billion.
Berkshire’s purchase is not an indicator that Buffett predicts that the market will rise. Moreover, Buffett did not move during the March stock market fall when the valuations were a bit lower. This deal shows that Buffett is still concerned about another stock price drop.
In conclusion, I might say that Warren Buffett is still going to have the last laugh just like before the Great Recession and recent dot com bubble burst.
More:
- Pressure On The US Stock Market as Pandemic Continues to Roar
- Newbies Criticize Buffett Over Fleeting Success in the Stock Market
