After saying for years that high valuations were thwarting his stock-buying efforts, Warren Buffett’s Berkshire Hathaway Inc is back hoovering up other companies’ shares.
The conglomerate made roughly US$41 billion of net purchases in the first quarter, including a boost to its Chevron Corp stake that vaulted the investment into Berkshire’s top four common stock holdings.
Buffett also disclosed that the company now holds an expanded 9.5 percent stake in Activision Blizzard Inc — an arbitrage bet on the video-game maker in the midst of being acquired by Microsoft Corp.
Berkshire has not been this significant of a net buyer of common stocks in any quarter in data going back to 2008. Buffett’s flurry of activity in the past few months fueled a number of questions from shareholders on Saturday at its first in-person annual meeting since 2019.
The gathering, held in Buffett’s hometown of Omaha, Nebraska, lasted hours as the CEO and vice chairman Charlie Munger fielded questions about markets, nuclear weapons and bitcoin. They were joined on stage by two key deputies, Greg Abel and Ajit Jain, who answered questions about railroads, cyberattacks and auto insurers. Last year, Abel was officially confirmed as the heir apparent to take over as Berkshire CEO from Buffett when he decides to step down.
Saturday’s event was dominated by Buffett, 91, and Munger, 98, who both gave no indication that they plan to step back from their roles anytime soon. The executives have slightly lessened other duties in the past few years, with Buffett announcing that this year’s charity lunch auction is to be his last after more than two decades, and Munger relinquishing his chairman title at the Daily Journal Corp.
Buffett and his deputies have struggled to find ways to put Berkshire’s cash to work in assets with higher returns, due in part to stiff competition from buyers, including private equity firms as well as high valuations.
However, Buffett and Munger were back in action during the first three months of the year, adding more Occidental Petroleum Corp shares and striking an agreement to buy Alleghany Corp for US$11.6 billion in a deal expected to close in the fourth quarter.
“We have so much trouble finding new ideas, we find it hard to ignore any,” Buffett said at the meeting, adding that any deal by Berkshire “has to be sizable now.”
Berkshire’s massive common equity holding in Occidental was one of its biggest disclosed purchases in the first quarter, and came on top of the US$10 billion it had invested in the oil producer years back.
Buffett said that the investment came together quickly after he spent a weekend reading a presentation from Occidental CEO Vicki Hollub.
“What Vicki Hollub was saying made nothing but sense, and I decided it was a good place to put Berkshire’s money,” Buffett said. “Two weeks later we had 14 percent of the company.”
Berkshire’s substantial investment in Chevron during the quarter, combined with its US$10 billion investment in Occidental’s preferred shares, add up to a US$40 billion bet on the oil sector, Edward Jones analyst Jim Shanahan said.
The purchases helped chip away at Berkshire’s cash pile, which ended the first quarter at US$106 billion, the lowest since the third quarter of 2018. The hoard had been trending at near-record levels in recent quarters.
As Berkshire revved up its stock-buying engine, the company slowed its roll on share repurchases during the quarter with just US$3.2 billion of stock buybacks, the lowest since the same period in 2020 and down from the US$6.9 billion repurchased during the last three months of last year.
Buffett had increasingly leaned on repurchases as one way to put money to work in a competitive dealmaking environment. Berkshire’s Class A shares were more expensive during the period, with a gain of more than 17 percent during the first quarter.
The conglomerate eked out a profit of just 0.3 percent to US$7.04 billion in the first quarter compared to the same period a year earlier. While manufacturers and retailers were strong during the period, underwriting at the insurers was softer this quarter.
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