SAT, APR 30, 2022
WARREN BUFFETT WATCH
Shareholder Meeting Special Edition
'We spent $40 billion in a hurry there in three weeks'
In late February, Warren Buffett's letter to Berkshire Hathaway shareholders essentially told them there wasn't much going on.
When it came to what was "new or interesting" at Berkshire, "there was little action of that sort in 2021."
At today's meeting of Berkshire shareholders, Buffett reported that between the beginning of the year and just a few days before the letter was released, the company spent $2.2 billion.
In the three weeks after the letter, it spent $40 billion. (Buffett says that now "we're back somewhat to our more lethargic mood.")
In total, Berkshire's cash fell from $147 billion at the start of the year to $106 billion at the end of March.
In response to a shareholder question, as relayed by CNBC's Becky Quick, asking what changed, Charlie Munger got a big laugh by answering simply, "We found some things we preferred owning to Treasury bills."
VIDEO: Warren Buffett and Charlie Munger kick off Berkshire Hathaway's annual meeting
Allegheny's new CEO, who used to run a Berkshire subsidiary, sent Buffett his first annual report. That led to a meal in New York and, very soon thereafter, an $11 billion acquisition deal.
Buffett read an analyst presentation and annual report from Occidental Petroleum, decided what the CEO was saying "made nothing but sense" and "decided that it was a good place to put Berkshire's money." Over the next few weeks, Berkshire bought a stake now worth $7.5 billion. (See the item below for Buffett's thoughts on how he got some help from people who are treating stocks like a "casino.")
Berkshire also picked up around $5 billion of HP.
And while he didn't say much about it, we learned today that Berkshire was spending a lot of money on Chevron.
Berkshire bought $21B of Chevron in the first quarter
It's the first time since 2019 that Buffett and Munger appeared before an arena with thousands of shareholders, but perhaps the biggest headline came before they took the stage, in the form of a footnote in this morning's first quarter 10-Q SEC filing.
Under a table summarizing its equity holdings, Berkshire says it owned $25.9 billion of Chevron stock as of March 31.
The oil giant's stock closed at $148.46 that day, which means Berkshire had around 174 million shares.
In its stock portfolio snapshot filing for the fourth quarter, Berkshire said it owned around 38 million shares as of December 31.
That means Berkshire bought more than 136 million shares during the first three months of the year.
Those shares are worth $21.3 billion at Friday's closing price of $156.67, putting the value of the entire stake at $27.3 billion.
It now accounts for almost 8% of Berkshire's publicly-disclosed stock portfolio, and is its third largest equity holding, behind Bank of America ($36.9 billion) and ahead of American Express ($26.5 billion).
'It's not because we're smart'
A recurring theme in today's meeting, and in past meetings, was Buffett and Munger complaining that some people were trading stocks, and especially options, as if they were in a casino. They pointed out that its in Wall Street's interest for that to happen.
"They don't make money unless people do things... and they make a lot more money when people are gambling than when they're investing. It's much better to have somebody that's going to trade 20 times a day and get all excited about it, just like pulling the handle on the slot machine."
But this time, Buffett said that the gambling sometimes produces opportunities for long-term investors.
VIDEO: Berkshire's Charlie Munger calls stock market manipulation 'incredible, crazy situation'
He marveled that Berkshire was able to buy a big chunk of a big company like Occidental in a short period of time.
"Where did the people go? The investors just were sitting around and there weren't very many, and the money was being made essentially by a bunch of people gambling on things. And that enabled us in a two-week period to buy 14% of a business that's been around for decades."
Treating companies like "poker chips" sometimes makes "markets do crazy things. And occasionally, Berkshire gets a chance to do something. And it's not because we're smart ... I think we're sane."
Berkshire bought more ActivisionBlizzard
VIDEO: Buffett says he's been buying Activision shares since Microsoft, now owns 9.5% of company
Today, Buffett said he decided to buy a lot more after that announcement, picking up shares that are trading below that deal price as an arbitrage play. (They're currently going for $75.60 per share.
He's essentially betting the deal will go through, and Berkshire will pocket the difference between what it paid for the shares and the higher deal price.
And, of course, some bitcoin bashing ...
VIDEO: If you offered me all the bitcoin in the world for $25, I wouldn’t take it, says Warren Buffett
VIDEO: Bitcoin is stupid 'cause it's very likely to go to zero,' says Charlie Munger
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-- Alex Crippen, Editor, Warren Buffett Watch