Warren Buffett’s Berkshire Hathaway sold billions of dollars worth of shares and invested little money in the U.S. stock market in the first three months of the year, a signal the popular investor doesn’t find appealing in a market that’s less attractive. volatile field.
Berkshire disclosed on Saturday that it sold $13.3 billion worth of stock in the first quarter and bought shares with a fraction of that. Instead, it put $4.4 billion to buy back its own shares, as well as $2.9 billion for shares of other publicly traded businesses.
The figures underline the struggle Berkshire faces in using mountains of cash at a time when Buffett and his longtime right-hand man Charlie Munger consider the valuation unappealing. The company’s cash pile has grown by $2 billion since the start of the year to $130.6 billion, the highest level since late 2021.
Munger last month told the Financial Times that investors should lower their expectations for stock market returns as the Federal Reserve raises interest rates and the economy slows.
The pair were appeared on stage in downtown Omaha by Gregory Abel and Ajit Jain, two vice presidents of Berkshire, for the company’s much-anticipated annual meeting.
Tens of thousands of shareholders took to the Midwest City to hear Buffett and the Berkshire team give a presentation this weekend, where they discussed artificial intelligence and its impact on the investment world, and their views on governance. Tesla chief executive Elon Musk — Musk overestimated himself, Buffett said — as well as the succession at the company.
Buffett is relatively upbeat about the outlook for the company he has led for the past 58 years, as well as the broader economy, supported by strong interest rate hikes from the Fed and a series of bank failures. has shaken confidence in the financial system.
He notes that the effects of the slowing economy are just beginning to be felt by Berkshire, although he doesn’t paint a bleak picture of the economy. Buffett said he expected earnings to fall for most of the business this year.
“It’s not a drop in jobs or anything, it’s a different environment than it was six months ago,” he said. “Some of our managers were surprised. Some have too much inventory to order.”
However, higher interest rates are also a boon for Berkshire. The company invests most of its $130.6 billion in cash in short-term Treasury bonds and bank deposits.
Earnings from short-term bills and cash-like deposits rose to $1.1 billion, up from $164 million a year earlier.
Buffett has been pressed to give his thoughts on the health of the US banking system, which is in the midst of a crisis, given the investor’s long tenure and history of supporting the industry.
The billionaire investor said Berkshire has become more cautious about investing in the industry as some banks suffer from rapidly flying deposits.
It’s a change from previous crises, when Berkshire’s capital helped revive both Goldman Sachs and Bank of America. The latter is now the core stock in the company’s stock portfolio.
Buffett declined to say whether it would cut its position in Activision Blizzard. bet a lot on after Microsoft agreed to buy the game maker. Shares of Activision have tumbled since UK regulators blocked the takeover, sending arbitrage trading conducted by Berkshire and a host of hedge funds into turmoil.
Disclosures have indicated that Berkshire increased its stake in Occidental Oil during the quarter, however, Buffett on Saturday said the company has no plans to take control of the oil company.
Investors will have to wait until the end of May to see how the company changes its portfolio, although quarterly filings show it has sold a sizable portion of its stake in the major oil company Chevron.
Berkshire reported a profit of $35.5 billion in the first quarter, or $24,377 per Class A share, largely thanks to a rebound in stocks that lifted the value of its value-share portfolio. their $328 billion. Profits were up from $5.6 billion a year earlier.
Operating income – Buffett’s preferred performance measure for Berkshire’s diversified group of businesses – rose 12.6% year over year to $8.1 billion. The figure includes the results of the Pilot Flying J truck stop business for the first time, which Berkshire took majority control in January.
One of Berkshire’s crown jewels, auto insurer Geico, has hit underwriting profit after six consecutive quarters of losses. The company said reducing the size of the ad and increasing the policy rate helped it generate a $703 million underwriting profit.
The impact of higher interest rates and slower economic growth is clear for businesses, including ice cream supplier Dairy Queen, aircraft parts maker Precision Castparts and railways BNSF.
Berkshire warned lower home sales continued to weigh on Clayton Homes, one of the largest manufacturers of modular homes in the US, and sales across its other residential businesses fell at the start of the year. . Traffic on its BNSF rail line also dropped earlier in the year, which the company blamed on imports from the lower west coast and the loss of customers.
Buffett has also been questioned about Apple’s important role in the Berkshire empire, with Apple’s stake in the iPhone maker worth $151 billion at the end of the first quarter – half the value of the entire portfolio. stock investment.
“It just happened to be a better business than any we owned,” he said. “Our railroad is a very good business, but it’s not as good as Apple’s business.”
Investors were quite upbeat at the meeting, joking that King Charles III’s coronation was a “competitive broadcast” on Saturday.
Berkshire shares are up 4.9% since the start of the year.