Buffet disclosed that he bought 5 million shares of UNH.
Some were talking about did Buffet made some short term trade, or did he sell his positon after end of Q2, because UNH was down after Q2.
This is his long term investment, he will not and he can not do short term trade. Why? becuase of the size of his position vs. the liquidity of UNH.
a. He bought 5 million share, which is rought 23-one month average daily trade volumn. keep in mind if your trade account for 10% of the daily volumn, your trade will significantly impact the price movement of the stock--- If you buy, you will push it higher, if you sell you will push it lower.
Therefore, it tooks Buffet much longer than one month to gradully acquire the 5 million. It is possible, Buffet's purchase supported UNH's price . Once the trade is done , it is also possible that UNH price will weaken without the big buying power behind it.
Bufffet knows this. Any bigger investors knows this, if they acquire a large position in open market.
He will not sell it, just because after his trade, the stock price come down.
B. Remember, Buffet is a long term investor. He has a margin of safety rule. If a stock price is way below its intrinsic value, he may look at it. Obviously, in his judgement, UNH price is way below its intrinsic value, even with the 10% plus drop after his purchase. His margin of safty is way bigger than the 10% . remember, he dose not care short term price fluctuation.
c. Some even question buffet's stock picking skill, and use some of his not successful stocks picking as example. this type of mentality does not fit investment. Investment pay attention to the gravity of average. On average his stock picking is very succussful. If you want use his past history as evident, it will tell you, his odd of success is way bigger than most professional and individual investors, including you.
