Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

General Motors Company (GM), Suncor Energy Inc. (USA) (SU): U.S. Stocks Collapse; Buffett Keeps Buying

Although we don’t believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes — just in case they’re material to our investing thesis.

U.S. stocks collapsed today — or at least that’s what some of the headlines might lead you to believe. Take your pick:

U.S. Stock Prices Tumble After Economic News (Dow Jones Business News)

U.S. Stocks Slammed; Dow Drops Over 200 Points (MarketWatch)

Steep Losses Pull S&P 500 Down To One-Month Lows (RTT News)

I guess those headlines are appropriate — if you happen to think the 1.43% drop in the S&P 500 qualifies as a “steep loss,” or the 1.47% decline in the Dow Jones Industrial Average amounts to getting “slammed.”

However, if your investment time horizon is measured in in years rather than days, weeks, or months, you probably already know that declines of this magnitude are hardly exceptional. In fact, if we analyze the daily trading history of the S&P 500 beginning in Jan. 1950, we find that losses that exceed today’s occur on roughly 5% of all trading days. Put that way, such losses might sound quite rare; but if I tell you that it’s something that occurs once a month, on average, you might begin to think about them differently.

Furthermore, despite August’s reputation as a quiet month, that frequency is actually slightly higher if we restrict ourselves only to August days. The bottom line is that it’s counterproductive to get worked up over today’s stock market decline, which is not unusual, assuming your time horizon is longer than the next few days.

Sure, the CBOE Volatility Index rose 13%, to close at 14.73. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days.) However, I had warned investors that the VIX looked underpriced at the beginning of the month; even after today’s increase, it remains substantially below its long-term average.

Instead of listening to traders, watch the long-term investor

General Motors Company (NYSE:GM)Meanwhile, after a delay due to a technical glitch, interested traders and investors finally got access to Berkshire Hathaway Inc. (NYSE:BRK.B)‘s stock holdings at the end of the second quarter. (Berkshire, along with other investment managers, reports this data to the SEC on a quarterly basis.)

Berkshire CEO Warren Buffett certainly isn’t shying away from the stock market. In aggregate, Berkshire Hathaway Inc. (NYSE:BRK.B) spent $4.64 billion on stocks in the second quarter, ending June with an equity portfolio valued at $101.9 billion. Buffett, and the two investment managers he employs — Todd Combs and Ted Weschler — are not concerned with the day-to-day “noise” of broad market moves; instead, they focus on identifying high-quality businesses trading at reasonable (or better yet, unreasonably cheap) valuations.

Among other purchases, Berkshire raised its stake in General Motors Company (NYSE:GM) by 60% and initiated positions in Suncor Energy Inc. (NYSE:SU) and Dish Network. The conglomerate also increased its largest stock position, that of lender Wells Fargo, by 1.1%, to 463.1 million shares (current value: $19.9 billion).

The article U.S. Stocks Collapse; Buffett Keeps Buying originally appeared on and is written by Alex Dumortier, CFA.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on LinkedIn. The Motley Fool recommends Berkshire Hathaway and General Motors. The Motley Fool owns shares of Berkshire Hathaway.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.