Warren Buffett’s Berkshire Hathaway sold billions of dollars worth of stocks and invested little money in the U.S. stock market in the first three months of the year, as the legendary investor saw little traction in a volatile market.
Berkshire reported on Saturday that it sold $13.3 billion worth of stock in the first quarter and bought back a fraction of that figure. Instead, it paid $4.4bn to buy back its own shares, as well as $2.9bn in shares of other publicly traded companies.
The figures underscore Berkshire’s struggle to put its mountain of cash to work at a time when Buffett and his longtime right-hand man Charlie Munger view valuations as unpalatable. The company’s cash pile has risen by $2bn since the start of the year to $130.6bn, its highest level since the end of 2021.
Munger told the Financial Times last month that investors should lower expectations for stock market returns as the economy slows as the Federal Reserve raises interest rates.
Berkshire reported a first-quarter profit of $35.5bn, or $24,377 per Class A share, largely driven by a rally in stocks that boosted the value of its $328bn portfolio of stocks. Profits were up from $5.6bn a year ago.
Operating income – Buffett’s preferred performance measure for Berkshire’s various business groups – rose 12.6 per cent to $8.1bn from a year earlier. For the first time the figure includes results from truck stop business pilot Flying J, which Berkshire took majority control of in January.
Results are often examined on a cross-sectional basis, touching on Berkshire’s dozens of businesses, including energy, logistics, housing and manufacturing.
One of Berkshire’s crown jewels, auto insurer Geico, swung to an underwriting profit after six consecutive quarters of losses. Advertising and raising policy rates helped the unit generate underwriting profits of $703mn, the company said.
The impact of high interest rates and slow economic growth was evident across businesses ranging from ice cream purveyor Dairy Queen to aircraft parts manufacturer Precision Castparts and the BNSF railroad.
Berkshire warned that lower home sales continued to weigh on Clayton Homes, one of the largest makers of modular homes in the U.S., and sales across its other housing businesses fell earlier this year. Traffic on its BNSF railroad also fell earlier in the year, the company blamed on fewer imports from the West Coast and the loss of a customer.
However, higher interest rates are a boon for Berkshire. The company invests most of its $130.6bn cash in short-term Treasury bills and bank deposits.
Income from those short-term bills and deposits, such as cash, rose to $1.1bn, up from $164mn a year ago.
The figures were released hours before Buffett and three Berkshire executives took the stage in downtown Omaha, where tens of thousands of shareholders gathered for the company’s annual meeting.
Shareholders will hear the 92-year-old billionaire and his vice chairmen Munger, Gregory Abel and Ajit Jain discuss the economy, the Fed’s efforts to reduce inflation and Berkshire.
All four will press on why the sprawling conglomerate hasn’t made significant investments in the US banking sector, as it did amid the financial crisis.
During that time, Berkshire’s capital helped propel both Goldman Sachs and Bank of America. The latter now plays a major role in the company’s stock portfolio.
Berkshire shares are up 4.9 percent since the start of the year.
