Warren Buffett revealed a few specifics about how he spent more than $50 billion earlier this year to Berkshire Hathaway investors on Saturday, assuring them that the company he established will last long after the 91-year-old tycoon is gone.
Thousands of investors crowded an Omaha arena on Saturday to hear Buffett and Berkshire’s vice-chairman address questions at Berkshire’s annual meeting, which was held in person for the first time since the epidemic began, but the turnout was likely lower than it had been in the past.
Berkshire Hathaway’s cash pile decreased to $106 billion in the first quarter from $147 billion at the start of the year, as Buffett invested $51 billion in equities and repurchased $3.2 billion of its own stock, according to the company’s earnings report released Saturday morning.
Berkshire spent more than $40 billion on equities during the next three weeks after Buffett warned shareholders in his annual letter on Feb. 26 that he was having problems finding anything to buy at favorable prices.
Buffett didn’t share all of his purchases, but he did identify a few highlights, like increasing Berkshire’s holding in oil giant Chevron to $26 billion, up from $4.5 billion at the start of the year, making it one of the conglomerate’s four largest assets. In the first half of March, Berkshire spent billions buying almost 14 percent of Occidental Petroleum’s stock, adding to its already large position in Apple stock.
According to Edward Jones analyst Jim Shanahan, Berkshire Hathaway now has more than $40 billion in the oil sector thanks to its investments in Chevron and Occidental.
Buffett was clearly on the lookout before Saturday, as he agreed to pay $11.6 billion for the Alleghany insurance giant and made another multibillion-dollar investment in HP Inc. Buffett said he acquired three German equities on Saturday, although he didn’t name them.
Berkshire Hathaway was able to profit from the fact that Wall Street is essentially operated like a “gambling parlor,” with many people speculating wildly on equities, according to Buffett.
“Berkshire gets a chance to do anything now and then, and it’s not because we’re smart.”It’s because we’re sane,” says the narrator.
Buffett announced on Saturday that he has staked a significant amount of money on Microsoft’s planned acquisition of Activision Blizzard. After Microsoft announced the deal in January, he upped his holding in Activision to around 9.5 percent of the company — or about 74 million shares — because Activision stock was selling for less than the $95 per share deal price, he said.
Buffett and his investing partner, Charlie Munger, both restated their previous criticisms of cryptocurrencies such as bitcoin, claiming that they do not generate anything. “Stupid because they’re likely to go to zero,” Munger remarked, and “evil because they weaken the Federal Reserve.” He further stated that they make American politicians appear dumb by not prohibiting them as China did.
Despite the fact that Buffett and the 98-year-old Munger lead Berkshire, investors haven’t asked much about succession planning, possibly because Buffett stated a year ago that Vice Chairman Greg Abel, who currently oversees all of the company’s non-insurance businesses, will eventually succeed him as CEO. Berkshire has two additional investment managers who will handle the company’s portfolio.
Buffett believes Berkshire Hathaway’s decentralized culture, which places a high value on trusting people to do the right thing and avoiding large risks, will help the company thrive well into the future, and that many of the companies it owns, such as the BNSF railroad and its major utilities, will remain economic stalwarts.
“Berkshire is designed to last a lifetime.”There is no such thing as a finish line,” Buffett declared. “The new management — and the management after them and after them — are simply stewards of an ingrained culture.”
Harris Kupperman, the founder of the Praetorian Capital hedge fund, said he isn’t concerned about the future of Berkshire Hathaway since the diversified conglomerate has a strong basis.
“He built it to the best of his ability. Nobody will ever be as good as him. “That’s self-evident,” Kupperman stated.
He believes Buffett’s ultimate successor will be able to reassess some long-term Berkshire investments, such as the company’s massive Coca-Cola stock, and determine if it still makes sense to keep them.
However, Berkshire investors are continually thinking about Buffett’s and Munger’s ages because there may not be many more meetings with both of them. Munger sat in a wheelchair at the meeting on Saturday.
“I’m not sure how much longer they’ll be able to do this,” said Miami resident Josu Elejabarrieta, 43, who was attending his first meeting.
In response to investor concerns about current high inflation, Buffett advised them to invest in themselves so that no matter how much a dollar is worth, someone will always want to pay them for their services. He claims that all of Berkshire’s businesses are paying exorbitantly higher costs for raw materials and finished goods, but that inflation was to be expected after the government spent so much money during the pandemic.
Buffett believes the country has become more politicized than it has been since the 1930s when public opinion on President Franklin D. Roosevelt was fiercely divided.
“When people grow tribal, I don’t think it’s a positive development for civilization,” he remarked.
Following the question-and-answer session, Berkshire shareholders voted down several proposals backed by large pension funds, including one that would have required Buffett to step down as chairman and others that would have required the company to issue reports on the financial risks it faces due to climate change and its diversity efforts. Berkshire Hathaway and Buffett, who control 32% of the vote, voted against all of the proposals, owing to the company’s decentralized nature, which necessitates few centralized reports.
Berkshire Hathaway reported a 53 percent drop in first-quarter earnings due to a huge fluctuation in the paper value of its investments earlier Saturday. Berkshire Hathaway reported a quarterly profit of $5.46 billion, or $3.702 per Class A share. This is down from $11.7 billion or $7.638 per Class A share a year ago.
Berkshire’s operating earnings, according to Buffett, are a better indicator of the company’s profitability because they eliminate investment gains and losses. Berkshire’s earnings were unchanged at $7.04 billion, or $4,773.84 per Class A share, compared to $7.018 billion, or $4,577.10 per Class A share, a year ago.
Berkshire’s operating earnings were expected to be $4,277.66 per Class A share, according to the four analysts polled by FactSet.
Berkshire Hathaway owns more than 90 businesses outright, including the BNSF railroad, numerous major utilities, Geico insurance, and a variety of manufacturing and retail businesses, in addition to investments.
Janet Dalton of Overland Park, Kansas, has been attending the gatherings for decades, she said. Her father bought equity in the Berkshire Hathaway textile company before Buffett took control in 1965 and began transforming it into the conglomerate it is today, so her family has a long history with the company. They never sold the stock, which is now worth about $500,000 per share.
Dalton stated that she misses Buffett’s more thorough business responses from earlier sessions she attended.
“It was like obtaining a mini-MBA when I initially came to the meetings.” “It’s becoming more generalized now,” Dalton explained. But it’s the chance to reconnect with friends and fellow investors she’s met at previous events that keeps her coming back year after year.
