Nobody knows more about investing than Warren Buffett. And earlier this week, I found myself wondering what, over an 80-year career, the man has pretty much seen it all.
Investing success is about getting the big decisions right. And earlier this week, I found myself wondering what Buffett would do…
What happened?
3i (LSE:III) issued its results for the 12 months leading up to 31 March on Thursday (14 May). And the stock crashed 24% when the market opened.
In this sort of situation, two bits of Buffett insight come to mind. One is the famous point about being greedy when others are fearful.
Another thing Buffett advises, however, is the following:
“When you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”
In other words, a falling stock isn’t automatically an opportunity. If there’s something wrong with the business, it’s best to get out as quickly as possible.
Buffett might favour holding investments forever. But it’s a fair point that his investment vehicle, Berkshire Hathaway, does sell shares when situations change.
So what should I do with my 3i investment? Is this a situation to seize the opportunity and buy more or to abandon ship before it gets worse?
Results
3i’s results were – in my view – basically fine. The private equity firm increased its net asset value per share 19.19% to £30.30.
A big part of this came from Action, its largest investment. The retailer increased its store count by 13% and like-for-like sales by 4.9%.
Those are decent numbers. But the reason the stock crashed is that things don’t look so impressive going forward.
Like-for-like sales growth has fallen to 2.4% in the first 19 weeks of 2026. That’s a sharp decline and the main reason 3i shares crashed.
Trading has been especially weak in France and Germany since the start of the conflict in Iran. And that remains a risk going forward.
There’s nothing Action or 3i can do about geopolitics. But, insofar as it can weigh on sales, it’s something investors need to be aware of.
What would Buffett do?
Action faltering has a big effect on 3i. That’s because the firm values its stake in the retailer on its balance sheet at a high multiple.
Fundamentally though, 3i’s unique strength hasn’t changed. It still – unlike other private equity firms – invests on its own schedule.
This is because it uses its own capital rather than raising funds from investors. So it can wait for the right opportunities.
That’s the foundation of the firm’s success and it’s still very much the case. So I think it’s clear what Buffett might do.
3i isn’t a chronically leaking boat. I think it’s a very good operation facing some near-term challenges that are weighing on its share price.
Given this, my way forward is pretty clear. I’m a buyer at today’s prices.
Buying ahead
I started buying 3i shares at a price-to-book (P/B) ratio of around 1.4. And I knew at the time that was probably a bit ambitious.
My view was that the company would probably grow into its valuation within a couple of years. And I still think that.
Today, however, the stock trades at a P/B ratio of 0.7. At that level, I see it as a greedy-when-others-are-fearful situation.
