Warren Buffett’s Berkshire Hathaway bet big on the US stock market in the first quarter, buying $51.1 billion worth of shares, as it leveraged the sprawling conglomerate’s cash pile as financial markets fell from record highs .
That’s a stark change from an investor who had been short of stocks for the past two years, warning of high and low valuations in the market that would generate substantial returns.
But global financial markets have weakened in recent months as Russia invaded Ukraine and fears of a Chinese economic slowdown rattled investor confidence.
That offered it a more attractive entry, according to analysts and investors who were warmed by the stock market vote of confidence from the so-called Oracle of Omaha.
The frenetic pace of stock buying was enough to sap Berkshire’s cash flow, which Buffett has often likened to a war chest. Its cash fell to $106.3 billion at the end of March, from just under $147 billion at the end of the year. The company’s first-quarter report showed it sold $9.7 billion in stock during the period, indicating it was a net buyer of $41 billion in stock at the start of the year. year – among its busiest quarters in recent memory.
The report showed that Berkshire had sharply increased its stake in energy company Chevron, listing its $25.9 billion stake among its top five holdings in a portfolio of shares currently worth $390 billion. The investment in Chevron accompanies billions of dollars in stock purchases in oil giant Occidental and printer and computer maker HP this year.
Buffett said Saturday he also ordered the company to buy millions more shares of Activision Blizzard, the games company Microsoft agreed to acquire in January. Berkshire had purchased just under 15 million shares – less than 2% of Activision shares outstanding – last year before the deal was completed, purchases led by one of two investment lieutenants from Buffett. Berkshire now owns 9.5% of the company, he said, which would make him the largest shareholder.
The 91-year-old chief executive added that he wanted to take advantage of the discount at which Activision shares were changing hands in the market from the $95 per share price Microsoft was willing to pay.
To fund these investments, along with $3.2 billion spent in the quarter on stock buybacks, Berkshire sold or let Treasury bills and other securities worth more than $44 billion arrive. due during the quarter.
Buffett has beefed up his trading credentials in recent months after being on the sidelines for much of the pandemic era. In March, he struck an $11.6 billion deal to take over insurer and toy maker Alleghany.
The figures were released on Saturday as tens of thousands of Berkshire shareholders traveled to Omaha to hear from the billionaire investor at the company’s annual meeting, the first held in person since 2019.
Berkshire reported net income of $5.5 billion in the first three months of 2022, less than half the level generated a year earlier. The company’s results include a $1.6 billion decline in losses on its investment and derivatives portfolio.
Excluding those fluctuations, which Buffett criticized as “generally meaningless” because US accounting rules require changes in the value of its investment portfolio to be included in quarterly results, the company reported operating profit of $7.04 billion. It was slightly above revenue a year ago.
The results showed that the company’s railroad, utility and manufacturing businesses posted stronger profits in the quarter, compared to year-ago levels.
Revenue at BNSF Railroad, which Buffett described in a February letter to shareholders as one of the conglomerate’s Big Four, soared 11% to $5.8 billion. The company warned that supply chain disruption, including lower auto shipments due to chip shortages, had weighed on shipment volumes.
“Furthermore, the development of geopolitical conflicts in 2022 has contributed to disruptions in supply chains, driving up the costs of raw materials, goods and services in many parts of the world,” he added. .
Its division that makes modular homes, Clayton Homes, saw a 21% increase in sales. And while he said demand remained strong, he warned rising mortgage costs “will likely slow demand for new home construction, which could negatively impact our business.”
Profits from its insurance business – which includes Geico – were nearly wiped out, falling to just $47 million from $764 million a year earlier. The Geico unit reported a loss of underwriting during the period, blaming an increase in insurance claims and higher payment costs on those benefits.
Berkshire shares have outperformed the U.S. stock market this year, rising 7.5% against a 13% decline by the benchmark S&P 500 index.