The market feels a little unhinged at this point.
AI fever continues to draw in first-time investors by the millions, with bubble chatter everywhere, as some stocks rally one week and plummet the next. In many ways, volatility has become the backdrop.
In moments like this, it’s perhaps ideal for investors to look for an anchor, and maybe no one fits that description better than the Oracle of Omaha, Warren Buffett.
Warren Buffett, through his investing behemoth in Berkshire Hathaway, has spent decades turning panic into patience, which ultimately culminated in performance.
Over his long tenure, he’s effectively compounded shareholder wealth at roughly 20% a year, a pace that leaves the S&P 500 in the rearview.
“Be fearful when others are greedy and greedy when others are fearful,” Buffett likes to say. That may seem simple until you test it out in a market that continues to swing hard.
That’s why a telling shift out of Bank of America is getting attention.
The bank isn’t waving a flag or naming names this time, but its tone has changed, and the subtext will probably sound a lot familiar to Buffett’s fans.
In a market that’s run red hot on AI and momentum trades, Bank of America urges investors to cool it, effectively taking a page from Warren Buffett’s playbook.
In its latest Small/Mid Cap Factors report, the nation’s second-largest lender advised investors to focus on value stocks, as the market is showing signs of froth.
More Warren Buffett:
The bank said small-cap value strategies lagged in Q3 but are likely to rebound on the back of “multiple signals” that the backdrop is moving in the right direction.
“The U.S. Regime Indicator recently moved to Recovery, the phase during which Value was the most consistent leader within small caps,” analysts wrote. They added: “Value has recently begun to outperform in mid caps,” even as growth stocks continue pushing higher.
Related: Jamie Dimon drops surprising take on AI stocks
According to BofA, small-cap gains haven’t really come from the typical high-quality growth names, which lagged in September and in Q3. This is why the bank feels the rally in weaker stocks is likely running out of steam.
That’s classic Buffett territory, where the focus is on durable businesses that come with a sensible price tag, when everyone else is chasing heat.
