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Warren Buffett tells shareholders about spending $51 billion

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Warren Buffett tells shareholders about spending $51 billion

Warren Buffett gave Berkshire Hathaway investors a few details of 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

April 30, 2022, 10: 13 PM

7 min read

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 could take advantage of Wall Street’s largely “gambling parlor” atmosphere, where many stock-speculators speculate wildly.

“Occasionally, Berkshire gets a chance to do something, and it’s not because we’re smart. Buffett stated that it’s because they’re rational.

Buffett announced Saturday that he had placed a large bet on Microsoft’s acquisition of 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 investing partner), reiterated past criticisms about cryptocurrencies such as bitcoin, because they aren’t producing anything. Munger stated that cryptocurrencies were “stupid” because they are likely to “go to zero” and “evil,” because they undermine Federal Reserve. He also said that they made American leaders look foolish by 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 has also two investment managers that will be taking over the portfolio.

Buffett stated that he believes Berkshire’s culture of trusting others and avoiding big risks, which relies on a lot of people doing the right things and taking small risks, will allow the company to thrive long into the future. Many of its companies 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 ever be the same. Kupperman stated that it was obvious. He said that Buffett’s successor may be able to evaluate some of the long-term Berkshire investments he has made over decades, and determine if it makes economic sense to keep things such as his large Coca-Cola share.

But Berkshire investors should keep in mind the ages of Buffett and Munger, as there might not be many meetings between them. Munger was in a wheelchair at Saturday’s meeting.

“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 the dollar amount. Buffett stated that all Berkshire companies pay extraordinarily high prices for their raw materials, which is to be expected given the amount of 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 is a positive development for society when people become tribal.

After the question and answer period, Berkshire shareholders rejected several suggestions backed by large pension funds. One would have forced Buffett to resign as chairman and another would have asked the company to report on financial risks related to climate change. 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 earnings provide a more accurate measure of company performance since 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’s been going to the meetings since decades. Because her father bought shares in Berkshire Hathaway’s textile company before Buffett took over it in 1965, and started to transform it into the conglomerate that it is today, the family association has been even more extensive. They never sold the shares, which now sell for nearly $500,000 apiece.

Dalton stated that she doesn’t get the detailed answers to business questions Buffett gave at her earlier meetings.

” When I first attended the meetings it felt like I was getting a mini MBA. It has become much more widespread,” Dalton stated. Part of the reason she keeps coming back year after years is her chance to connect with investors and friends that she met in past meetings.


ABC News


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