Warren Buffett was a net seller of stocks in the first quarter as the market set record highs, but he continued to buy back Berkshire Hathaway (BRKB) shares.
During the company’s annual meeting in Los Angeles, the first time in more than 50 years it took place outside Buffett’s hometown of Omaha, Neb., Vice Chairman Charlie Munger let slip that “Greg will keep the culture.”
He was referring to top lieutenant Greg Abel, who runs the non-insurance businesses. Buffett later confirmed to CNBC that Abel, 58 years old, is his successor.
Berkshire Hathaway earnings for the first quarter, out Saturday, revealed the conglomerate bought $6.6 billion more shares after a record $27.4 billion in repurchases last year.
After historically shying away from repurchases, Berkshire Hathaway stock has become one of Buffett’s top purchases, explaining it earlier this year as a way for investors to “own an ever-expanding portion of exceptional businesses.”
Berkshire’s aggressive share repurchases contrasts with the M&A deals spun by Buffett during and after the 2008 financial crash.
Buffett also sold $6.45 billion in stock in Q1 and bought $2.57 billion in stock. That and the lack of deal-making helped Berkshire’s cash pile grow to more than $145.4 billion, up 5% from Q4 and just off its high of $145.7 billion in Q3.
Buffett In La La Land
With this cash pile in mind, his unusual decision to travel outside Omaha for the annual meeting also begs the question: Why Los Angeles? Hedge funds reportedly have tracked corporate jets for clues on imminent deals, including an Occidental Petroleum (OXY) plane that was spotted in Omaha before Buffett announced a $10 billion investment in the oil company.
Surely a chat with the “Oracle of Omaha” would’ve been in high demand among corporate executives in L.A. while he was in town.
But Buffett doesn’t just invest in public companies, and one of the biggest private local ones is SpaceX, which is building a vast constellation of broadband satellites while becoming a major Pentagon and NASA contractor.
CFRA analyst Cathy Seifert declined to speculate about Buffett’s motives in L.A. But in an April 24 note, she wrote that she still sees acquisitions remaining part of Berkshire’s capital allocation strategy.
To be sure, deal-making may be far from his mind now as he has bemoaned “sky high” prices that set back his hopes for a big acquisition.
And in February, Buffett admitted that buying Precision Castparts for $37 billion in 2016 was a big mistake, citing its exposure to the hard-hit aviation and energy sectors. It forced an “ugly $11 billion write-down” that Buffett said reflected his error in paying too much for the business.
Warren Buffett Stocks
Berkshire Hathaway’s class B shares rose 2% to 280.80 on the stock market today. BRKB stock is extended from a February breakout past a 235.09 flat-base buy point, meaning shares are not in buy range. Shares offered a follow-on buy point around 246 in late March off a test of the 10-week line, according to MarketSmith chart analysis, but are also extended past that entry.
The Q1 earnings statement will also revealed that Berkshire Hathaway’s closely watched stock portfolio gained $4.69 billion.
But details on individual stock buys and sells during the quarter will come later. A regulatory filing should be posted within days of the annual meeting.
He dumped all his airline stocks and several long-held bank stocks last year, but sank more than $2 billion into Bank of America (BAC), turning it into his No. 1 stock by number of shares. Apple was No. 1 by market value and portfolio weighting, at 44%.
One Of The ‘Family Jewels’
Apple has emerged as one of the foundations of Berkshire. In a section of his annual letter titled “The Family Jewels and How We Increase Your Share of These Gems,” he noted in February that most of Berkshire’s value resides in its insurance operations, rail giant BNSF, its 5.4% ownership in Apple, and the Berkshire Hathaway Energy utility business.
Wall Street expects BNSF to benefit from a reopening economy in Q2. But analysts have speculated about broader consolidation among railroads now that Kansas City Southern (KSU) is the target of a bidding war between Canadian Pacific (CP) and Canadian National Railway (CNI).
Either deal would create the first freight-rail network connecting Canada, the U.S. and Mexico.
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