Warren Buffett Tells Shareholders He’s Spent $51 Billion

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Warren Buffett gave Berkshire Hathaway investors some details on Saturday about how he spent more than $50 billion earlier this year and reassured them that the business he’s built will last long after. the departure of the 91-year-old billionaire.

Tens of thousands of investors filled an Omaha arena on Saturday to listen to the vice presidents of Buffett and Berkshire answer questions at Berkshire’s annual meeting, which was back in person for the first time since the start. of the pandemic, but the participation rate was probably lower than before. regularly attract more than 40,000.

Berkshire revealed in its earnings report on Saturday morning that its mountain of cash had fallen to $106 billion in the first quarter, from $147 billion at the start of the year, as Buffett invested $51 billion in stocks and bought $3.2 billion of its own stock.

Buffett told shareholders that just after telling them in his February 26 annual letter that he was having trouble finding anything to buy at attractive prices, Berkshire spent more than $40 billion on stocks over the course of the following three weeks.

Buffett didn’t reveal everything he bought, but did mention several highlights, including increasing Berkshire’s stake in oil giant Chevron to $26 billion from $4.5 billion at the start. of the year to make it one of the conglomerate’s four largest investments. Berkshire also spent billions to buy 14% of Occidental Petroleum shares in the first half of March, and added to its already massive investment in Apple shares.

Edward Jones analyst Jim Shanahan said with investments from Chevron and Occidental combined, Berkshire now has more than $40 billion invested in the oil sector.

Even before Saturday, it was clear Buffett was on the hunt because he had agreed to buy insurance conglomerate Alleghany for $11.6 billion and made another multi-billion dollar investment in HP Inc. Buffett said on Saturday he also bought three German stocks but did not name them.

Buffett said Berkshire was able to take advantage of the fact that Wall Street is largely run as a “gaming parlor” with many people speculating wildly in stocks.

“Once in a while, Berkshire gets the chance to do something, and it’s not because we’re smart. It’s because we’re sane,” Buffett said.

Buffett revealed on Saturday that he had made a big bet on Microsoft’s planned acquisition of Activision Blizzard. He said a few months after one of Berkshire’s other investment managers bought about 15 million Activision shares, he increased that stake to about 9.5% of the company – or about $74 million. shares – after Microsoft announced the deal in January because Activision shares were selling for less than $95 per share.

Buffett and his investment partner, Charlie Munger, reiterated their past criticisms of cryptocurrencies like bitcoin for not producing anything. Munger said cryptocurrencies are “dumb because they’re likely to go to zero” and “bad because they undermine the Federal Reserve.” Plus, he said they were making U.S. leaders stupid not to ban them like China did.

Even though Berkshire is led by Buffett and Munger, 98, investors haven’t asked many questions about succession planning, perhaps because Buffett said a year ago that Vice Chairman Greg Abel , who now oversees all of the company’s non-insurance activities, will eventually replace him as CEO. Berkshire also has two other investment managers who will take over the company’s portfolio.

Buffett said he believes Berkshire’s decentralized culture, which relies heavily on trusting people to do the right thing and avoid huge risks, will help the company thrive in the future and many businesses it owns like the BNSF railroad and its major utilities will remain mainstays of the economy.

“Berkshire is built forever. There is no end point,” Buffett said. “The new management – and the management after them and after them – are just the guardians of a culture that is integrated.”

Investor Harris Kupperman, who runs hedge fund Praetorian Capital, said he was not particularly worried about Berkshire’s future because the eclectic conglomerate has a solid base.

“He built it as well as he could build it. No one will ever be him. It’s obvious,” Kupperman said.

He said Buffett’s eventual successor might be able to reevaluate some long-term investments in Berkshire that Buffett has held for decades and decide if it still makes sense to hang on to things like the Coca-Cola’s huge stake in the company.

But the ages of Buffett and Munger are still on the minds of Berkshire investors as there may not be too many meetings with the two of them anymore. Munger sat in a wheelchair during Saturday’s meeting.

“Actuarially, I don’t know how long they can do it,” said Josu Elejabarrieta, 43, of Miami, who was attending his first meeting.

In response to concerns over today’s high inflation, Buffett told investors that the best thing to do was to invest in themselves so that someone would always want to pay them for their services, no matter how valuable they were. a dollar. He said all Berkshire businesses are paying extraordinarily higher prices for raw materials and products, but inflation should have been expected after all the money the government sent during the pandemic.

Buffett said he believes the country has become more polarized than it has been since the 1930s, when public opinion became sharply divided over President Franklin Roosevelt.

“I don’t think it’s a good development for society in general when people go tribal,” he said.

After the question and answer period, Berkshire shareholders rejected several proposals backed by major pension funds, including one that would have required Buffett to step down as chairman and others that would have required the company to issue statements. reports on the financial risks it faces. related to climate change and its diversity efforts. Berkshire and Buffett, who control 32% of the vote, opposed all proposals in part because the company is so decentralized that it requires little centralized reporting.

Earlier Saturday, Berkshire said its first-quarter profits fell more than 53% due to a sharp swing in the paper value of its investments. Berkshire said it earned $5.46 billion, or $3.702 per Class A share, in the quarter. That’s down from $11.7 billion, or $7.638 per Class A share, a year ago.

Buffett says Berkshire’s operating profits are a better measure of company performance because they exclude investment gains and losses. By that measure, Berkshire’s earnings were flat at $7.04 billion, or $4,773.84 per Class A share, from $7.018 billion, or $4,577.10 per Class A share, it a year ago.

The four analysts polled by FactSet expected Berkshire to report operating profit of $4,277.66 per Class A share.

In addition to investments, Berkshire Hathaway owns more than 90 businesses, including the BNSF Railroad, several major utilities, Geico Insurance, and an assortment of manufacturing and retail businesses.

Janet Dalton of Overland Park, Kansas, said she has been attending the meetings for decades. His family has an even longer association with the company because his father bought stock in the textile company Berkshire Hathaway even before Buffett took it over in 1965 and began to turn it into the conglomerate it is today. today. They never sold the shares, which are now selling for almost $500,000 each.

Dalton said she missed the more detailed business responses that Buffett used to give in previous meetings she had attended.

“When I first came to meetings it was like getting a mini-MBA. Now it’s become more mainstream,” Dalton said. But part of what keeps her coming back year after year is the opportunity to reconnect with friends and other investors she has met in past meetings.

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