Warren Buffett’s Berkshire Hathaway dumps billions of dollars of US stocks

Warren Buffett’s Berkshire Hathaway has sold billions of dollars worth of stock in the first three months of the year and invested little in the U.S. stock market, a sign that high-profile investors are facing a volatile market. It shows that I felt little attraction in

Berkshire said on Saturday it sold $13.3 billion worth of stock in the first quarter and bought shares for a fraction of that. Instead, it invested $4.4 billion in share repurchases and $2.9 billion in shares of other publicly traded companies.

The numbers highlight the struggle Berkshire faces to make its pile of cash work at a time when Buffett and his longtime right-hand man Charlie Munger see Buffett as unappetizing. to The company’s cash pile has increased by $2 billion since the beginning of the year to his $130.6 billion, the highest level since the end of 2021.

Munger told the Financial Times last month that investors should lower their expectations of stock market returns as the U.S. Federal Reserve hikes interest rates and the economy slows.

The two were joined by Berkshire’s two vice-chairmen, Gregory Abel and Ajit Jain, for the company’s much-anticipated annual meeting in downtown Omaha.

Tens of thousands of shareholders gathered in the Midwestern city this weekend to hear from Buffett and Berkshire’s team about artificial intelligence and its implications for the investment world, and their stance against Tesla CEO Elon Musk. Discussed views — Musk overestimated himself, Buffett said — as well as company succession.

Buffett has been relatively optimistic about the outlook for the company he’s led for the past 58 years, and the broader economy fueled by aggressive rate hikes by the Fed and a string of bank failures that have shaken confidence in the financial system. .

He said the effects of the slowdown were just beginning to be felt at Berkshire, but did not paint a pessimistic picture of the economy.Buffett expects profits to fall for most businesses this year. said there is.

“Employment hasn’t fallen off the cliff, but it’s different than it was six months ago,” he said. “Many of our managers were surprised. Some had too many orders in stock.”

But rising interest rates are also benefiting Berkshire. The company invests most of his $130.6 billion in cash in short-term Treasury bills and bank deposits.

Income from these short-term bills and cash-like deposits surged to $1.1 billion from $164 million a year earlier.

Given the long tenure of investors and the history of supporting the industry, Buffett was forced to give his thoughts on the health of the U.S. banking system in the midst of the crisis.

The billionaire investor said Berkshire has become more cautious about investing in the industry given the rapid flight of funds some banks have suffered.

This is a change from previous crises in which Berkshire’s capital underpinned both Goldman Sachs and Bank of America. The latter is now a central holding in the company’s stock portfolio.

Buffett declined to say whether Microsoft would cut its big-gaming position at Activision Blizzard after it agreed to buy the game maker. Activision’s share price plunged after UK regulators moved to block the takeover, throwing arbitrage by Berkshire and a string of hedge funds into chaos.

Berkshire increased its stake in Occidental Petroleum during the quarter, according to disclosures, but Buffett said Saturday that the company does not intend to control oil companies.

Investors will have to wait until late May to see how the company has shifted its portfolio.

Berkshire reported earnings of $35.5 billion in the first quarter, or $24,377 per Class A share. This was largely due to the rally in equities that boosted the value of the $328 billion equity portfolio. Earnings increased from his $5.6 billion a year earlier.

Operating income — Buffett’s favorite performance indicator for Berkshire’s diverse business group — increased 12.6% from the year to $8.1 billion. For the first time, the numbers include the performance of the Pilot Flying J, a truck that Berkshire took a majority of his stop in January.

Geico Auto Insurance Company, one of Berkshire’s crown jewels, turned profitable underwriting after six straight quarters of losses. The company said it was able to generate an underwriting profit of $703 million by reducing advertising and raising policy interest rates.

The impact of higher interest rates and slower economic growth was evident across businesses across ice cream maker Dairy Queen, aircraft parts maker Precision Castparts and BNSF Railways.

Berkshire warned that falling home sales continue to weigh on Clayton Homes, one of the largest modular home makers in the US, as sales across other housing businesses fell earlier in the year. Traffic on the company’s BNSF rail line also fell earlier in the year, which the company said was due to lower imports from the West Coast and the loss of customers.

Buffett was also asked about the key role Apple plays in the Berkshire empire. The iPhone maker’s shares were valued at $151 billion at the end of the first quarter, less than half the value of his entire stock portfolio.

“It just happens to be better than any business we own,” he said. “Our railroad is a very good business, but not as good as Apple’s.”

Investors struck a rather bright tone at the conference, joking that Charles III’s coronation was Saturday’s “competitive broadcast.”

Berkshire shares are up 4.9% year-to-date.