Buffett stays on sidelines with cash pile rising to US$137 billion - BNNBloomberg.ca

Warren Buffett has been waiting years for stocks to look more attractive. He apparently didn’t think the first-quarter plunge was that opportunity.

The famed investor’s Berkshire Hathaway Inc. spent the quarter building its massive cash pile to a record US$137 billion as the coronavirus slowdown started to grip the U.S. That was up almost US$10 billion from the end of 2019, while Buffett spent just a net US$3.5 billion buying shares of his and other companies.

Buffett, who will host Berkshire’s annual meeting virtually later Saturday, has largely stayed in the shadows as the pandemic hammered the global economy and stock markets. That’s a contrast to the financial crisis in 2008, when his Omaha-based company dipped into its vast cash reserves to gain lucrative preferred shares and rescue businesses teetering on the edge of collapse. While Berkshire’s operating earnings climbed in the first quarter, Buffett warned of pain from the virus’s fallout.

“As efforts to contain the spread of the COVID-19 pandemic accelerated in the second half of March and continued through April, most of our businesses were negatively affected, with the effects to date ranging from relatively minor to severe,” the company said in a regulatory filing Saturday.

Berkshire’s Class A shares have dropped about 19 per cent this year through Friday’s close, worse than the 12-per-cent decline in the S&P 500 over the same time period.

Berkshire bought US$1.8 billion of stocks on a net basis in the period, and repurchased just US$1.7 billion of its own stock, less than it did in the last three months of 2019. The company recently disclosed that it pared back stakes in Delta Air Lines Inc. and Southwest Airlines Co. as airlines have been pummeled by travel restrictions and stay-at-home orders worldwide.

Buffett, Berkshire’s chairman and chief executive officer, has been on the hunt for higher-returning investments such as acquisitions or stock purchases for years, but has struggled amid what he called “sky-high” prices. That has prompted a range of questions about whether he can continue the market-beating run that turned Berkshire into one of the world’s most valuable companies.

The conglomerate’s first-quarter net income plunged to a loss of US$49.7 billion, driven by US$55.5 billion in unrealized losses in the massive stock portfolio. Gains in the insurance unit’s investing portfolio helped push operating earnings up almost six per cent to US$5.87 billion.

Berkshire started to see the the COVID-19 pandemic affect units including its railroad, BNSF, which reported a 5.2-per-cent decrease in volume in the first quarter. Precision Castparts reported lower sales across all of its major markets, partially because of the pandemic and Boeing Co.’s 737 Max issues.

Buffett will host the annual meeting starting at 3:45 p.m. in Omaha with key deputy Greg Abel by his side. Buffett’s longtime business partner, Charlie Munger, won’t be in attendance. Follow the TopLive blog here.

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2020-05-02 12:28:09Z
CBMiZWh0dHBzOi8vd3d3LmJubmJsb29tYmVyZy5jYS9idWZmZXR0LXN0YXlzLW9uLXNpZGVsaW5lcy13aXRoLWNhc2gtcGlsZS1yaXNpbmctdG8tMTM3LWJpbGxpb24tMS4xNDMwMzU20gEA