Warren Buffett’s Berkshire Hathaway is betting big on the US stock market 2022-04-30 09:51:36


Warren Buffett’s Berkshire Hathaway bet big on the US stock market in the first quarter, buying $51.1 billion in shares as it put the cash pile in the massive conglomerate to work as financial markets slid from record highs.

It’s a dramatic turnaround from an investor who’s been a seller of stocks for the past two years, Warning of high ratings A little in the market would generate great returns.

But global financial markets have weakened in recent months, as Russia invaded Ukraine and fears of a Chinese economic slowdown rattled investor confidence.

This gave him a more attractive entry, according to analysts and investors who were relieved by the vote of confidence in the stock market from the so-called Oracle of Omaha.

The furious pace of stock buying was enough to have a negative effect on Berkshire’s cash pile, which Buffett often likened to the war treasury. The company’s cash flow fell to $106.3 billion at the end of March from just under $147 billion at the end of the year. The company’s first-quarter report showed that it sold $9.7 billion of stock during the period, indicating that it was a net buyer of $41 billion of stock at the start of the year — among the most active quarters in its recent memory.

Line chart of Berkshire Hathaway's cash and cash equivalents ($1 billion) showing that stock purchases fell in the Berkshire War Fund

The report showed that Berkshire has sharply increased its ownership of energy company Chevron, listing its $25.9 billion stake as one of the five largest holdings in a stock portfolio that is now worth $390 billion. Investing in Chevron accompanies billions of dollars From stock purchases in oil major Occidental, HP printers and computers this year.

To fund these investments, in addition to the $3.2 billion spent during the quarter on share buybacks, Berkshire sold or left Treasuries and other securities worth more than $44 billion maturing in the quarter.

Buffett has polished his deal-making credentials in recent months after sitting on the sidelines for much of the pandemic. In March, he reached a deal worth $11.6 billion for a company The insurance company takes on the manufacturer’s game of the rich.

The numbers were revealed Saturday as tens of thousands of Berkshire shareholders descended on Omaha to hear the billionaire investor at the company’s annual meeting, its first in-person meeting since 2019.

Berkshire reported net income of $5.5 billion in the first three months of 2022, less than half the level achieved in the previous year. The company’s results included $1.6 billion in losses in its portfolio of investments and derivatives.

Line chart of performance since the start of 2020 (%) showing Berkshire shares have taken the lead in broad terms in the market

Excluding those fluctuations, which Buffett criticized as “usually meaningless” because US accounting rules require changes to the value of its investment portfolio to be included in quarterly results, the company reported operating profit of $7.04 billion. This was marginally above last year’s earnings.

The results showed that the company’s rail, utility and manufacturing companies posted stronger profits in the quarter, compared to last year’s levels.

Revenue for the BNSF rail line, which Buffett described in a February letter to shareholders as one of the conglomerate’s four giants, rose 11 percent to $5.8 billion. The company has warned that supply chain disruption, including reduced auto shipments due to chip shortages, has affected shipment volumes.

“Moreover, the development of geopolitical conflicts in 2022 has contributed to disruptions in supply chains, increasing the cost of goods, commodities and services in many parts of the world,” she added.

Its division that makes modular homes, Clayton Homes, reported a 21 percent increase in sales. While she said demand remained strong, she cautioned that rising mortgage costs “are likely to slow demand for new housing construction, which could negatively impact our business.”

Profits from insurers — which include Geico — have been virtually wiped out, dropping to just $47 million from $764 million the year before. The Geico unit reported an underwriting loss for the period, blaming the slight increase in insurance claims and higher reimbursement costs on those benefits.

Berkshire shares have outperformed the US stock market this year, rising 7.5 percent compared to a 13 percent decline for the S&P 500.