OMAHA, Neb. As recently as February, Warren Buffett lamented that he did not find much out there that was worth buying.
Not so anymore.
After a years-long drought agreement, Mr. Buffetts Berkshire Hathaway Inc.
opens the fuel supply again. It entered into a $ 11.6 billion deal to buy insurance company Alleghany Corp..
, ready to become Berkshire’s largest acquisition in six years. It bought millions of shares in HP Inc.
and Occidental Petroleum Corp..
And it dramatically increased its stake in Chevron Corp..
making the energy company one of Berkshire’s top four equity investments.
The big question: Why?
“It’s a game room,” said Mr. Buffett Saturday about the markets over the last few years. He added that he accused the financial industry of motivating risky behavior among investors. Although he finds speculative bets “obscene”, the rise in volatility across markets has had one good effect, he said: It has allowed Berkshire to find undervalued companies to invest in again after a period of relatively quiet.
“We are dependent on incorrectly priced companies through a mechanism where we are not responsible for incorrect pricing,” said Mr. Buffett.
Mr. Buffett, 91, shared his thoughts on the state of the market, Berkshire’s insurance business and recent investments at the company’s annual shareholders’ meeting in downtown Omaha.
Berkshire also held shareholder votes, with investors eventually cracking down on measures that asked Berkshire to make its chairman independent and urged the company to disclose climate risk across its companies.
Shareholders eager to score best seats stood in line for hours before the doors opened in the arena, where Mr. Buffett; right hand Charlie Munger, 98; and Vice President Greg Abel, 59, and Ajit Jain, 70, took the stage. When Mr Buffett stepped in, a lone audience member took the opportunity to send a message. “We love you,” the person shouted.
Mr. Buffett seemed just as excited to see the thousands of shareholders sitting in front of him.
It was much better to be able to be with everyone personally, he said.
Until recently, Berkshire had pretty much been sitting on its pile of money. Its business prospered; an improving economy and a roaring stock market helped push net earnings to a record high in 2021. But it did not announce any major trades, something that made many analysts and investors wonder about its next move. Berkshire ended the year with an almost record amount of cash on hand. (Following Berkshire’s acquisition, the company’s war chest shrank to $ 106.26 billion at the end of the first quarter, from $ 146.72 billion three months earlier.)
Mr. Buffett’s sense that there were no attractive investment opportunities for Berkshire quickly gave way to enthusiasm in late February, he said on Saturday when he received a copy of Alleghany’s CEO Joseph Brandon’s annual report.
The report piqued his interest. He decided to follow up with Mr. Brandon and flew to New York City to talk about a potential deal during dinner.
If the CEO had not reached out, “it would not have occurred to me to write to him and say, ‘Let’s take us together,'” Mr. Buffett.
Berkshire’s decision to build a 14% stake in Occidental also came with a report. Sir. Buffett said he had read an analyst note about the company, whose stock is still trading below its highest level in 2011, and decided that the casino-like market conditions made it a good time to buy the stock.
In just two weeks, Berkshire opened millions of shares in the company.
“I do not think we have ever had anything that we have now in terms of the amount of pure gambling activity that goes on daily,” said Mr. Munger. “It’s not pretty.”
But the amount of speculation in the markets has given Berkshire a chance to spot undervalued companies, said Mr. Munger, enabling the company to put its $ 106 billion liquidity reserve to work.
“I think we’ve earned more because of the crazy game,” said Mr. Munger.
Another business that caught Berkshire’s eye? Chevron. Berkshire’s stake in the company was worth $ 25.9 billion per share. March 31, up from $ 4.5 billion by the end of 2021, according to the company’s filing. That makes Chevron one of Berkshire’s four largest shareholdings along with Apple,
American Express Co. and Bank of America Corp.
Neither Mr. Buffett or Mr. Munger specifically addressed Berkshire’s decision to increase its Chevron stake.
But the two men offered a defense for the oil industry. It’s a good thing for the United States to produce more of its own oil, Mr Buffett said. Sir. Munger went on to say that he could hardly imagine a more usable industry.
At the meeting, Mr Buffett also revealed that Berkshire has increased its stake in Activision Blizzard Inc.
The company now has a 9.5% position in Activision, a merger arbitrage bet that Berkshire can profit from if Microsoft Corp.’s
proposal to acquire the video game producer goes through.
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In the end, Berkshire is not trying to make its investments based on what they think the stock market will do when it opens every Monday, Mr said. Buffett.
“I can not predict what [a] stock will do … We do not know what the economy will do, “he said.
What Berkshire is focusing on is doing what it can to continue to generate returns for its shareholders, Mr said. Buffett. Berkshire produced 20% compounded annual gains between 1965 and 2020 compared to the S&P 500, which yielded a return of 10% including dividends over the same period.
“The idea of losing other people’s money permanently … it’s just a future I do not want to have,” said Mr. Buffett.
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