Warren Buffett’s Berkshire Hathaway buys $51bn of equities

This year’s Berkshire Hathaway shareholder meeting saw Warren Buffett alongside three vice chairmen answer questions about the firm’s recent investments, swollen cash pile and share buybacks. With stocks stuck in a downturn for the first quarter of 2022, Warren Buffett pounced on the opportunity to buy up $51bn of equities, such as Occidental Petroleum and HP.

The US stock market has become something of a gambling parlour, with investors treating equities like chips by preferring to buy and sell call options, rather than treat them as investments.

This was the view of Warren Buffett (pictured) who was speaking at the Berkshire Hathaway [BRK.B] annual shareholder meeting held in Omaha, Nebraska, over the weekend, which has been dubbed the “Woodstock for capitalists”.

 

The volatility that has throttled markets over the past couple of months has opened up new investment opportunities. Over the course of two weeks in March, Buffett snapped up 14% of the oil and gas giant Occidental Petroleum [OXY].

“Imagine trying to [buy] 14% of the farms in this country. 14% of the apartment houses. 14% of the auto dealerships, or just anything, when already 40% were locked up some other place,” Buffett told shareholders in disbelief as reported by CNBC, which was livestreaming the event exclusively.

Big bets on oil and video games

Buffett and Charlie Munger, the vice chairman of Berkshire Hathaway, have been actively looking for ways to put their cash to work. The cash pile reached $146.7bn at the end of 2021, but investments made in the first three months of 2022 saw this reduced to $106.3bn.

As well as the Occidental Petroleum purchase, the firm also added to its stake in Activision Blizzard [ATVI]. Buffett bought roughly $975,000 of the stock towards the end of last year, according to the latest 13F filed in February. He told shareholders that he had been adding to his position as the share price has fallen since it was recently announced that Microsoft [MSFT] would be acquiring the video game publisher for $95 per share. Microsoft’s share price is down 13.6% in the year-to-date (through 4 May), while Activision is up 19.8% in the same period. 

Activision Blizzard stockholders voted in favour of the deal on 28 April, but there are concerns that US president Joe Biden may block it on antitrust grounds. Speaking about the issue, Buffett said: “We don’t know what the Justice Department will do, we don’t know what the EU will do, we don’t know what 30 other jurisdictions will do. One thing we do know is that Microsoft has the money.”

Berkshire Hathaway is no stranger to merger arbitrage, having previously owned software firm Red Hat which was bought by IBM [IBM] for $34bn in 2019, but not before seeking approval from US and EU regulators. “If the [Activision-Microsoft] deal goes through, we make some money, and if the deal doesn’t go through, who knows what happens,” Buffett added.

The quarterly report for the three months to the end of March shows that Berkshire Hathaway’s stake in Chevron [CVX] swelled to a value of $25.9bn. The latest 13F shows its value was almost $4.5bn at the end of 2021.

In the early part of the second quarter, Berkshire Hathaway disclosed that it owned 121 million shares in HP [HPQ] after topping up its stake and taking its ownership of the computer and printer maker to 11.5%. 

Buffett’s investing prowess to continue

Buffett’s firm spent $51bn on stocks in total in the first quarter, selling $10bn worth of equities. Amid the flurry of activity in early 2022 and putting the cash pile to work, some Berkshire Hathaway shareholders have been asking how long Buffett, 91, and Munger, 98, will remain at the helm, making investment decisions.

The pair gave no indication at the annual meeting that this would be happening any time soon. But they did report a slowdown in share buybacks for the first three months, spending $3.2bn in the first three months of the year compared to $6.9bn in Q4 2021.

Though the firm reported a steep drop in earnings from $11.71bn in the first three months of 2021 to $5.46bn in Q1 2022, operating earnings were flat year-over-year at $7.04bn. Buffett has previously said that operating profit is a better metric to judge the firm’s success by.

The performance of the Berkshire Hathaway B shares outperformed the S&P 500 in the first quarter, showing that Buffett’s investing prowess will likely continue. The stock returned 18% versus the index’s negative return of 5%. However, the stock price dropped around 8% in April compared to the index’s fall of nearly 9%.