Omaha Warren Buffett was in top form. “We always have so much fun when you come to visit,” enthused the Berkshire Hathaway boss as he greeted his shareholders at the company’s headquarters in Omaha on Saturday. For the first time since 2019, the star investor was able to hold its legendary general meeting with an audience again and more than 10,000 shareholders flew in for it. That was significantly fewer than the 40,000 who traveled to Omaha before the pandemic. Still, Buffett has never been a fan of Zoom meetings and appreciates engaging with his shareholders at the three-day event he dubbed “Woodstock for Capitalists.”
His message was clear: Berkshire Hathaway is back, as a host and as an investor. In the past few weeks, the conglomerate has been more active than it has been for a long time: In the first quarter alone, Berkshire bought shares worth $ 51 billion, according to the quarterly figures, which were also published on Saturday.
Buffett can act so decisively because he is both CEO and head of the board of directors and investment manager and the structures in his group are deliberately unbureaucratic and uncomplicated. Berkshire has no legal department, no human resources department, no investor relations. Only a few dozen employees work at the headquarters in Omaha. Berkshire’s subsidiaries make most of the decisions themselves. The group is one of the largest in the US, with a market capitalization of $712 billion. It includes insurance, industrial and energy sectors, as well as a good 80 medium-sized companies and a $390 billion block of shares.
It is a unique general meeting for a unique group. “Buffett has made a lot of shareholders rich,” said Larry Cunningham, a law professor at George Washington University who has written several books on Berkshire. This has resulted in shareholders being exceptionally loyal and celebrating Buffett like a rock star.
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On the fringes of the event, companies from the Berkshire Empire will display their products and sell them to shareholders at a special price. There are boats from the manufacturer Forest River for $200,000, as well as T-shirts and baseball caps with Buffett’s photo emblazoned on them, diamonds from the jeweler Borsheims are also available at a special price.
Apple CEO Tim Cook also traveled to Omaha. Buffett has invested in the iPhone maker since 2016 and is Apple’s largest single investor. “I’m just proud that he’s invested in our company,” Cook said to the cameras as he walked the main exhibition hall.
These are the highlights of the Annual General Meeting:
Big bets on Chevron and Activision
Buffett has been unusually determined to buy stocks in recent weeks. He significantly increased his stake in Chevron from $4.5 billion to $26 billion. The oil company is fourth in the list of its largest holdings. Buffett also increased his stakes in another oil company, Occidental Petroleum, and Apple, which is already the largest position in his portfolio.
Buffett also educated his shareholders on his strategy at video game maker Activision. One of his two investment managers, Ted Weschler or Todd Combs, originally built a small position just before Microsoft’s acquisition was announced in January. No one had any insider knowledge of the deal, Buffett assured.
Since then, he has significantly increased his stake in Activision to currently 9.5 percent. The reason: arbitrage. The stock closed at $75.60 on Friday. However, Microsoft is willing to pay $95. “Once in a while I see an arbitrage opportunity and I take it,” said Buffett, who turns 92 this summer. If the takeover is approved by the competition authorities, “then we’ll make some money. And if not, then we’ll see what happens.”
In Germany, too, he is still looking for takeover targets and he prefers it if “offers fall into our laps”, as was the case with Berkshire’s takeover of the motorcycle dealer Louis from Hamburg. However, Berkshire is picky. “We’re looking at some transactions for Berkshire, but we need larger volumes for the group’s headquarters in Omaha,” says Zypora Kupferberg in an interview with the Handelsblatt, who is looking for deals for Buffett in Germany and also engineered the Louis takeover.
Buffett’s Berkshire Hathaway significantly reduced cash reserves in the first quarter and bought millions of new shares.
(Photo: Reuters)
Solid quarterly figures
Berkshire Hathaway’s net income was $5.5 billion, down significantly from a year earlier. However, the result is subject to fluctuations because paper profits and losses have to be shown there as well. Operating profit is $7 billion, slightly better than a year ago.
Buffett’s railroads, industrials, and energy businesses were particularly strong. The insurance business, meanwhile, was poor, with profits falling from $764 million to $47 million. Berkshire’s cash reserves decreased significantly due to the stock purchases. They were at $106.3 billion at the end of March. At the end of December they were just under $147 billion.
Analysts believe Berkshire is well-positioned for the current economic cycle, which is characterized by high inflation and rising demand for manufactured goods and oil.
Combined with the stock purchases of Chevron and Occidental Petroleum in recent weeks, Buffett has now invested more than $40 billion in the oil industry, according to Edward Jones analyst Jim Shanahan.
“Powerless” against nuclear risks
Buffett and Greg Abel, head of Berkshire’s energy division, were thoughtful when asked by a shareholder about the risks of nuclear attacks. “We live in a very, very, very dangerous world,” Buffett said. But “we are powerless against an attack. We have no solution, and there is no solution to it,” he clarified. Berkshire’s insurance division would explicitly not insure against nuclear risks. But Abel assumes that in an emergency, insurers could be obliged to pay for damages. “But only if there are also politicians and regulators,” Buffett joked.
However, Berkshire actively defends itself against cyber attacks, which are launched daily against all areas of the group, especially against the energy suppliers, which belong to Berkshire’s energy division. “The cooperation between us and the government works very well here,” said Buffett.
Plea against Bitcoin and gambler mentality
Buffett and his deputy chairman, Charlie Munger, also used the AGM to vent their displeasure with Wall Street and the boom in the largest cryptocurrency, Bitcoin. The stock markets would resemble a “gambling booth,” Buffett complained. “Wall Street makes a lot more money when people gamble than when they invest,” so the incentives are wrong.
Munger, known for his sharp tongue, took the chance to dish out against online broker Robinhood. The start-up, which went public last year, was instrumental in attracting young traders to the market and encouraging them to trade as much as possible during the pandemic. “God does justice,” Munger etched, referring to Robinhood’s poor stock performance. The company has lost 72 percent of its value since going public.
The 98-year-old also had no friendly words for Bitcoin. “It is my philosophy of life to avoid things that are either stupid, evil or foolish. Bitcoin is all three.” He assumes that the price “could fall to zero”. In his criticism of Bitcoin, Buffett primarily pointed out that the largest and oldest cryptocurrency is an unproductive asset. As a big value investor, Buffett would be more likely to invest in farms or in rentals, he says.
Berkshire stock is one of the big winners in the US stock market right now. It’s America’s most expensive stock, breaking through $500,000 for the first time in March. The paper gained 7.5 percent this year. The broader S&P 500 stock index, which Buffett likes to compare himself to, lost 13 percent. Yet another reason for shareholders to celebrate Buffett and Munger.
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