When it comes to investment Warren Buffett is considered as the Oracle of Omaha because he knows what ordinary investors might not know quickly. Warren Buffet has more than 128 billion dollars of investment fund, which he would like to invest in profitable ventures. However, recently, Warren offered $140 per share or $5 billion to buy Tech Data, which is a hot technology distributor. Still, he lost the bidding war to Apollo Global Management, which was willing to pay $145 per share or $5.14 billion. Now, this decision of Warren Buffett getting back from this bid raises many questions about the current market situation.
The actual reason why Buffett has backed from this deal is not known, but experts believe that the deal seemed to be oversized to Buffet. Recently Warren Buffet wrote a letter in which he mentioned how prices of long term oriented businesses have skyrocketed from the last few years. The competition for buying the right company has increased tremendously. Many private equity firms have billions of dollars to invest; hence the prices keep rising.
The S&P 500, on the other hand, has risen by more than 25% during this year, even though the US has an intense trade war with China for the last many months. The price-earnings ratio of S&P 500 has gotten better this year, although overall, it’s still not that much bright. The valuation at which Buffet has decided not to invest in a company tells a lot about the current state of the stock market. The big question which experts are raising is if Buffet is not willing to pay the premium for a rightly valued company, then what normal should investors do who don’t have that many significant funds.