Buffett's Cash Pile Rises by $2 Billion

Warren Buffett’s Berkshire Hathaway dumped billions of U.S. stocks in the first quarter, as the conglomerate found few good valuations in a volatile market, the Financial Times reports.

Berkshire’s cash pile rose by $2 billion to $130.6 billion, the company revealed Saturday at its annual shareholder meeting in Omaha, Nebraska. The famed investor’s company sold $13.3 billion of stock in the first quarter, putting only $2.9 billion of that back into the stock market and $4.4 billion into Berkshire Hathaway stock repurchases.

Berkshire’s cash pile is now at its highest level since the close of 2021.

Berkshire Vice Chairman Charlie Munger said last month he foresees the economy slowing as the Federal Reserve continues to raise interest rates, and that investors should expect lower returns.

Munger also warned that banks are loaded up with too many bad commercial loans.

“It’s not nearly as bad as it was in 2008—but trouble happens to banking just like trouble happens everywhere else,” Munger told the Financial Times.

On Saturday, Buffett said the effects of the slowing economy were only just beginning to be felt—though he did not depict a gloomy outlook for the investment firm he founded 58 years ago, or the U.S. economy.

“It isn’t that employment has fallen off a cliff or anything, but it is a different climate than it was six months ago,” Buffett said. “A number of our managers were surprised. Some had too much inventory on order.”

While Buffett warned about higher interest rates for the general market, his firm has benefitted from the lion’s share of his cash being invested in short-term Treasuries and bank deposits—which generated $1.1 billion in interest in the first quarter, up considerably from $164 million in the first quarter of 2022.

Buffett also spoke about his $151 billion stake in Apple—nearly half of Berkshire Hathaway’s entire stock holdings.

“It just happens to be a better business than any we own,” said Buffett, who has praised Apple’s strategy and CEO Tim Cook.

Operating Earnings Up 12.6%

Berkshire reported a profit of $35.5 billion for the first quarter, $24,377 for Class A shares, up from profit of $5.6 billion a year earlier.

Operating earnings, which are Buffett’s preferred performance measure, were up 12.6% to $8.1 billion.

Berkshire Hathaway stock is up 4.9% year to date.

Buffett was asked about his outlook for the health of the U.S. banking system, as well as the national debt. The Oracle of Omaha disparaged the handling of recent tumult in the banking sector and said a debt ceiling showdown could bring "turmoil" to the world’s financial system.

Buffett criticized how politicians, regulators and the press have handled the failures of Silicon Valley Bank, Signature Bank and First Republic Bank, saying their "very poor" messaging has unnecessarily frightened depositors.

"Fear is contagious" and "you can't run an economy" when people worry if their bank deposits are safe, he said.

As for Berkshire’s bank investments, Buffett said billions in deposit withdrawals from these and other regional banks have made him more cautious about investing in banks—a sector Berkshire Hathaway has shorn up in previous crises, most notably the Great Recession of 2008.

Berkshire has been quick to support U.S. banks during periods of instability, investing $5 billion in Goldman Sachs in the 2008 financial crisis and plowing another $5 billion into Bank of America during the U.S. debt-ceiling crisis of 2011. Both stocks are now core Berkshire Hathaway holdings.

Asked about Activision Blizzard, which Berkshire bet heavily on after Microsoft said it would buy the video game maker, Buffett declined to say whether he was cutting the position. Ever since UK regulators said they were going to block the takeover, Activision shares have tumbled.

Berkshire Hathaway continued to increase its stake in Occidental Petroleum in the first quarter, filings with the Securities and Exchange Commission showed. Buffett repeated his claim that his company is not planning to take control of the oil giant.

Other filings show Berkshire sold a sizeable stake in Chevron in the first three months of the year.

Other Holdings

Another key holding, Geico, swung to a $703 million underwriting profit in the quarter after six consecutive quarters of losses.

Berkshire warned that declines in residential real estate sales would continue to weigh on modular home manufacturer Clayton Homes and other housing-related positions.

Buffett set a lighthearted tone at the start of the meeting Saturday by joking that King Charles III’s coronation was a “competing broadcast.”