Warren Buffett’s Berkshire Hathaway sold billions of dollars worth of stock in the first three months of the year and put little money into the US stock market as the famous investor saw little appeal in a volatile market.
Berkshire announced Saturday that it had sold $13.3 billion worth of shares and bought shares for a fraction of that number in the first quarter. Instead, the company invested $4.4 billion in repurchasing its own stock and $2.9 billion in the stock of other publicly traded companies.
The numbers underscore the struggle Berkshire faces to leverage its cash pile at a time when Buffett and his longtime right-hand man, Charlie Munger, view valuations as unsavory. The company’s cash balance has increased by $2 billion since the beginning of this year to $130.6 billion, the highest since the end of 2021.
Munger told the Financial Times last month that investors should lower their expectations for stock market returns as the Federal Reserve hikes interest rates and the economy slows.
Berkshire reported first-quarter earnings of $35.5 billion, or $24,377 per Class A share, largely due to a stock rally that boosted the value of its $328 billion stock portfolio. Profit increased from $5.6 billion last year.
Operating income — Buffett’s preferred measure of performance for Berkshire’s diverse group of companies — rose 12.6 percent year over year to $8.1 billion. For the first time, the number includes results from rest stop company Pilot Flying J, which Berkshire acquired a majority stake in January.
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The results often come under scrutiny given the cross-section of the country where Berkshire touches dozens of companies, including in energy, logistics, housing and manufacturing.
One of Berkshire’s crown jewels, auto insurer Geico, posted an underwriting profit after six straight quarters of losses. The company said reducing advertising and raising interest rates helped the unit post an underwriting profit of $703 million.
The impact of higher interest rates and slower economic growth was evident across companies, including ice cream supplier Dairy Queen, aircraft parts maker Precision Castparts and BNSF railroad.
Berkshire warned that Clayton Homes, one of the largest makers of modular homes in the US, continues to be weighed down by lower home sales and that sales at its other home companies were down earlier in the year. Traffic on its BNSF railway also fell earlier in the year, which the company attributed to lower imports from the West Coast and the loss of a customer.
However, higher interest rates have also been a boon for Berkshire. The company invests the majority of its $130.6 billion in cash in short-term Treasury bills and bank deposits.
Income from these short-term bills and cash-like deposits increased to $1.1 billion from $164 million a year earlier.
The numbers were released just hours before Buffett and three other Berkshire executives took the stage in downtown Omaha, where tens of thousands of shareholders had 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 lower inflation and Berkshire itself.
The four men are likely to press why the sprawling conglomerate hasn’t invested substantially in the US banking sector as it did in the midst of the financial crisis.
Back then, Berkshire’s capital helped prop up both Goldman Sachs and Bank of America. The latter is now a core position in the company’s stock portfolio.
Berkshire stock is up 4.9 percent year-to-date.