Warren Buffett tells shareholders about spending $51 billion
OMAHA, Neb. — Warren Buffett gave Berkshire Hathaway investors a few details Saturday about how he spent more than $50 billion earlier this year and again reassured them that the company he built will endure long after the 91-year-old billionaire is gone.
Tens of thousands of investors packed an Omaha arena Saturday to listen to Buffett and Berkshire’s vice chairmen answer questions at Berkshire’s annual meeting that was back in person for the first time since the pandemic began, but the turnout was likely smaller than when it used to regularly attract more than 40,000.
Berkshire revealed in its earnings report Saturday morning that its mountain of cash shrank to $106 billion in the first quarter from $147 billion at the beginning of the year as Buffett invested $51 billion in stocks and repurchased $3.2 billion of its own shares.
Buffett told shareholders that right after he told them in his annual letter on Feb. 26 that he was having trouble finding anything to buy at attractive prices, Berkshire spent more than $40 billion on stocks over the next three weeks.
Buffett didn’t reveal everything he bought but did mention several highlights, including boosting Berkshire’s stake in oil giant Chevron to $26 billion, up from $4.5 billion at the beginning of the year to make it one of the conglomerate’s four biggest investments. Berkshire also spent billions buying up 14% of Occidental Petroleum’s shares in the first half of March, and added to its already massive investment in Apple stock.
Edward Jones analyst Jim Shanahan said that with the Chevron and Occidental investments 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 agreed to buy the Alleghany insurance conglomerate for $11.6 billion and made another multibillion-dollar investment in HP Inc. Buffett said Saturday that he also bought three German stocks but didn’t name them. Buffett stated that Berkshire was able take advantage of Wall Street’s largely “gambling parlor” atmosphere, with many people speculating on stocks.
“Occasionally, Berkshire gets a chance to do something, and it’s not because we’re smart. Buffett stated that it’s because we are sane.
Buffett announced Saturday that he had placed a large bet on Microsoft’s planned acquisition Activision Blizzard. He said a couple months after one of Berkshire’s other investment managers bought roughly 15 million Activision shares, he increased that stake to roughly 9.5% of the company — or about 74 million shares — after Microsoft announced the deal in January because Activision stock was selling for less than the $95 per share deal price. Both Buffett, along with Charlie Munger, his partner in investing, reiterated their previous criticisms of cryptocurrency like bitcoin. They don’t produce anything. Munger stated that cryptocurrencies are “stupid” because they’re likely “to go to zero” and “evil,” because they undermine the Federal Reserve. He also said that they make American leaders look foolish for not banning them as China did.
Even though Berkshire is led by Buffett and the 98-year-old Munger, investors didn’t ask much about succession planning perhaps because Buffett said a year ago that Vice Chairman Greg Abel, who oversees all of the company’s non-insurance businesses now, will eventually replace him as CEO. Berkshire also has two investment managers who will be taking over the company’s portfolio.
Buffett stated that he believes Berkshire’s decentralized culture, which relies heavily upon trusting people to do right and avoiding big risks, will allow it to thrive long into the future. Many of the companies it holds like BNSF railroad and major utilities will also continue to be pillars of the economy.
“Berkshire is built to forever. Buffett stated that there is no end point. “The new management — and the management after them and after them — are just custodians of a culture that’s embedded.”
Investor Harris Kupperman, who leads the Praetorian Capital hedge fund, said he’s not especially worried about the Berkshire’s future because the eclectic conglomerate has a solid foundation.
“He built it the best he could. He is not going to be the same person again. Kupperman stated that it was obvious. He said that Buffett’s successor may be able to reevaluate long-term Berkshire investments Buffett has held for decades, and decide if it makes sense to keep things like the huge Coca-Cola stake.
Berkshire investors should keep in mind the ages of Buffett and Munger as there may not be many more meetings with them. During Saturday’s meeting, Munger was in a wheelchair.
“Actuarially, I don’t know how much longer they’ll be able to do this,” said Josu Elejabarrieta, 43, of Miami, who was attending his first meeting. Buffett advised investors to invest in themselves to ensure that they are always paid for their services, regardless of how much a dollar may be worth. He stated that all Berkshire’s companies pay extraordinarily high prices for raw materials, but this is to be expected given all the money sent by the government during the pandemic.
Buffett said he thinks the country has become more polarized than it has been at any time since the 1930s when public opinion split sharply about President Franklin Roosevelt. He said that he doesn’t believe it’s a good thing for society when people become tribal.
After the question-and-answer-period, Berkshire shareholders voted down several proposals supported by large pension funds. One would have required Buffett’s resignation as chairman and another would have required the company report on the financial risks it is facing in relation to climate change and its diversity efforts. Berkshire and Buffett, who controls 32% of the vote, opposed all the proposals partly because the company is so decentralized that it requires few centralized reports.
Earlier Saturday, Berkshire said its first quarter earnings fell more than 53% on a large swing in the paper value of its investments. Berkshire reported a $5. 46 billion, or $3. 702 per Class A share, during the quarter. That’s down from $11.7 billion, or $7. 638 per Class A share, a year ago.
Buffett claims that Berkshire’s operating profits are a better indicator of the company’s performance, as they do not include investment gains or losses. Berkshire’s earnings were $7. 04 billion, or $4,773. 84 per Class A share, up from $7. 018 billion, or $4,577. 10 per Class A share, a year ago.
The four analysts surveyed by FactSet expected Berkshire to report operating earnings of $4,277. 66 per Class A share.
In addition to investments, Berkshire Hathaway owns more than 90 business outright, including BNSF railroad, several major utilities, Geico insurance and an assortment of manufacturing and retail companies.
Janet Dalton, Overland Park, Kansas said that she has been attending the meetings since decades. Her family has an even longer association with the company because her dad bought stock in the Berkshire Hathaway textile company even before Buffett took it over in 1965 and began to convert it into the conglomerate it is today. They never sold the shares, which now sell for nearly $500,000 apiece.
Dalton stated that she misses the more in-depth business answers that Buffett used give at earlier meetings.
” When I first attended the meetings, it was almost like getting a mini MBA. It has become more general,” Dalton stated. Part of what keeps her coming back year in and year out is the opportunity to reconnect with investors she’s met at past meetings.
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