(Bloomberg) – As war broke out in Europe and US inflation rose sharply, Berkshire Hathaway Inc.’s Warren Buffett doubled a proven strategy for navigating the fallout.
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The billionaire investor went on his biggest stock buying spree for at least a decade, unafraid of the geopolitical turmoil and fears of runaway inflation. He and his deputies dug deeper into the U.S. stock market and expanded the conglomerate’s stake in Chevron Corp. and Activision Blizzard Inc., although Buffett acknowledged the “extraordinary” price increases in Berkshire’s business.
Buffett, who held court in Omaha, Nebraska, on Saturday at Berkshire’s annual shareholders’ meeting, had faced questions about why he did not take advantage of the downturn when the pandemic took hold. Now that war and inflation are fueling market volatility, leading to the S&P 500’s worst quarter in two years, it has risen amid uncertainty, earning $ 41 billion in first-quarter net equity purchases. This is the largest amount of data dating back to 2008.
“As long as Buffett and his team pay reasonable prices for quality companies, these investments should perform well in any environment – inflationary or otherwise,” said Darren Pollock, a Berkshire investor who is a principal at Cheviot Value Management LLC. They reflect “the large amount of cash coming into Berkshire’s coffers along with what we believe is becoming an increasingly obvious desire to get around cash as inflation becomes more ingrained.”
Buffett said he could not predict the trajectory of inflation in the coming months or years, though he said he has seen price increases across his companies. He also admitted – as he has done before – that his company has not always been good at timing its purchases of assets, though it has been “reasonably good to find out when we got enough for our money.”
On the home front, Berkshire gave up on one of its key capital implementation levers, signaling that buybacks are not quite as attractive to the company right now. Still, the $ 3.2 billion repurchase it made, along with its other investments, helped shrink the conglomerate’s pile of money to about $ 106 billion – a sum that is still above Buffett’s preferred safety margin.
Berkshire’s stake in Chevron, which was nearly $ 4.5 billion at the end of 2021, reached $ 25.9 billion at the end of March, according to its first-quarter regulatory application. The company’s Activision share, which accounted for only 1.87% of the video game company’s ordinary shares, rose to 9.5% as Berkshire bet that their deal with Microsoft Corp. would close securely. Activision shares rose 2.5% to $ 77.51 at 8:11 a.m. at the start of New York trading Monday.
“It’s my purchases, not the manager’s who bought it a few months ago,” Buffett said on Saturday about the increased stake in Activision. “If the deal goes through, we’re making some money, and if the deal doesn’t go through, who knows what’s going to happen.”
The billionaire carefully navigated some of the biggest topics of the year, if he dealt with them at all. Rare explicit comments were made on Russia’s invasion of Ukraine, although Buffett addressed a question about the risk of nuclear weapons. He told a little about Berkshire’s own succession plan.
Here are some of the other key topics that came up on Saturday:
Buffett confirmed last year that Greg Abel, vice president in charge of non-insurance activities, was the top candidate to succeed him when he stepped down as CEO. Abel, along with fellow Vice President Ajit Jain, joined Buffett, 91, and longtime business partner Charlie Munger, 98, on stage for part of the meeting.
Still, Buffett gave no indication that he was planning to resign his position soon, and his appearance on stage reassured some investors about his ability to keep up with the job.
“The level of mental acuity and humor is still there. It really is something, ”said James Armstrong, whose Henry H. Armstrong Associates oversees investments in Berkshire shares. “I feel pretty happy that the management of the company is in good shape.”
Buffett joked that the age of top executives honestly requires a chance for investors to check the executives in.
“It’s been three years and it’s much better to see actual shareholders, owners, partners,” Buffett said to start the meeting in the morning. “If you own a business and you have two guys – 98 and 91 – running the business, you have the right to actually see them in person.”
Buffett again addressed the impact of inflation after warning shareholders last year that the economy was red-hot. Inflation harms bondholders as well as people who store money under sofas.
“It scams almost everyone,” Buffett said. “If you could really have a completely stable unit of money spending for the next hundred years, it would be better for business and investors in general.”
What Bloomberg Intelligence says:
“Berkshire Hathaway’s net purchase of shares for $ 41.5 billion in light of inflation was the key to Q1 results, with the lack of share buybacks in April potentially signaling more cash on the way.”
– Matthew Palazola, BI Senior Industrial Analyst, and Kylie Towbin, BI Associate Analyst
Click here to read the survey.
Berkshire’s companies have not been immune to the pressure. Dairy Queen CEO Troy Bader said in an interview Friday that it is a real challenge. Brooks Sports Inc. CEO Jim Weber acknowledged the impact on his running shoes business, but expressed some optimism that supply challenges and inflationary pressures that have weighed on the economy will diminish.
“There has been such a bubble in the demand for Covid, people have been buying things at an incredible rate,” Weber said. “It’s not going to go down, I think, but it will normalize. And when it’s normalized, I think this whole capacity challenge in the supply chain will go back to normal. I think some prices may be more attractive. , because there will be overcapacity. “
Buffett and Munger have been constant skeptics of cryptocurrencies, with Munger calling it a “harmful poison.” The pair aired their deep criticism again on Saturday, in which Buffett noted that he would rather own lots of farmland or apartments – what he calls productive assets – than Bitcoin.
“What should I do with it?” said Buffett. “It’s not going to do anything.”
(Updates with Activision stock price in seventh section, Activision quote in eighth, Bloomberg Intelligence research.)
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