Buffett invests big chunk of Berkshire Hathaway’s cash

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Berkshire Hathaway’s first-quarter earnings fell more than 53% on a large swing on the paper value of its investments, but Warren Buffett found some ways to put the company’s massive cash pile to work

April 30, 2022, 4: 09 PM

5 min read

OMAHA, Neb. — Berkshire Hathaway’s first-quarter earnings fell more than 53% on a large swing on the paper value of its investments, but Warren Buffett found ways to put some of the company’s massive cash pile to work, which gave shareholders something to talk about at Saturday’s annual meeting.

Berkshire said it earned $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.

But the key change during the quarter was that Berkshire’s mountain of cash shrank to $106 billion from $147 billion at the beginning of the year as it invested $51 billion in equities. Buffett also spent $3.2 Billion repurchasing Berkshire stock.

Buffett told shareholders Saturday that right after he wrote to 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, including one day in early March when he spent $4.6 billion at the peak.

During the first quarter, Buffett agreed to buy the Alleghany insurance conglomerate for $11.6 billion and made multibillion-dollar investments in HP Inc. and Occidental Petroleum. Buffett said Berkshire bought up 14% of Occidental’s shares in the first half of March as it built its stake, and it added to its already massive investment in Apple stock during the quarter. However, he hasn’t disclosed all of his stock purchases yet, so it’s not immediately clear everything Berkshire invested in this year

But Berkshire did say in its quarterly report that its stake in oil giant Chevron ballooned to $26 billion by the end of the quarter, up from $4.5 billion at the beginning of the year, to make it one of the company’s four largest investments. 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.

Buffett stated that Berkshire was able take advantage of Wall Street’s largely “gambling parlor” atmosphere, with many people speculating on stocks.

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

” We have stockbrokers who don’t know much about stocks advising people who know very little,” Munger stated. But Berkshire claimed that the value of its investments fell by $1. 58 billion in the first quarter when a year ago that paper estimate of its investments grew by $4.7 billion. This was responsible for the majority of the swing in net income.

Buffett claims that Berkshire’s operating profits are a better indicator of the company’s performance, as 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.

This beat Wall Street expectations. The four analysts surveyed by FactSet expected Berkshire to report operating earnings of $4,277. 66 per Class A share.

Berkshire said Saturday that profits improved at most of its businesses, including the railroad, utilities and manufacturing companies it owns, but underwriting income fell at its insurance companies.

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. Tens of thousands of shareholders packed into an Omaha arena, not far from Berkshire’s headquarters on Saturday to hear Buffett and Berkshire vice chairmen answer any and all questions.

Japanese investor Heihachiro “Hutch” Okamoto is attending the meeting for his first time this year partly because he is hearing so much interest in investing in the U.S. stock market at the brokerage company where he works in Japan.

“Mr. Okamoto stated that Buffett is a proxy for the U.S. Stock Market, so he wanted to be there.

Janet Dalton, Overland Park, Kansas said that she has been attending the meetings since decades. Her family has an even longer association with the company because her dad bought stock in the Berkshire Hathaway textile company even before Buffett took it over in 1965 and began to convert it into the conglomerate it is today. They never sold the shares, which now sell for nearly $500,000 apiece.

Dalton stated that she misses the more in-depth business answers that Buffett used give at earlier meetings.

” When I first attended the meetings, it was almost like getting a mini MBA. It has become more general,” Dalton stated. Part of what keeps her coming back year in and year out is the opportunity to reconnect with investors she’s met at past meetings.

ABC News

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