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Warren Buffett Still Seems More Fearful Than Greedy

May 05, 2020 4:17 PM ETBerkshire Hathaway Inc. (BRK.B), BRK.A122 Comments
Gary Gambino profile picture
Gary Gambino


  • Berkshire Hathaway has been a net seller of equities and has raised cash since the start of the COVID-19 related shutdowns.
  • Investors looking for Berkshire to make opportunistic deals have been disappointed as governments and debt markets stepped in to provide liquidity.
  • Berkshire is in capital preservation mode because of the wide range of possible outcomes for public health and the economy.
  • Berkshire stock could outperform the S&P if the market has not yet bottomed. If the market is already in recovery, Berkshire could underperform, at least in the near term.

Buffett’s Surprising Conservatism

Buffett: DonSource: quora.com

Heading into Berkshire Hathaway’s (NYSE:BRK.A) (NYSE:BRK.B) Q1 2020 earnings release and annual meeting webcast, some investors were eager to see how Warren Buffett would deploy some of the company’s massive cash hoard of nearly $125 billion with which it started the 2020. (Cash figure represents Cash and T-Bills held within the Insurance and Other segment.) Many were surprised to see that this figure was essentially unchanged, once accounting for the $8.6 billion payable for T-Bills purchased but not settled at the end of Q1. Berkshire had about $3.8 billion of free cash flow in the quarter. Most of this was deployed by spending a net $1.8 billion on equity investments and $1.7 billion on buybacks of Berkshire stock. This level of spending was in line with recent quarters and not representative of an environment Buffett would characterize as “raining gold”. The Berkshire stock buybacks were completed by March 10 at average prices above $214 per B share. As prices continued to fall below $200, buybacks did not continue.

The “risk-off” behavior continued in a big way in April as Buffett disclosed that Berkshire Hathaway sold a net additional $6 billion worth of equities. The headlines mention Berkshire throwing in the towel on its airline investments due to pandemic-related changes in the business models that could last for a long time. I estimate the airline sales proceeds at about $4 billion, so there was another $2 billion worth of stocks sold that Buffett did not discuss. We won’t know the details on those sales until August when we see the Form 10-K and 13-F for 2Q.

Berkshire Airline Investments

While these actions caught many Berkshire observers off guard, Buffett provided his reasoning during the Q&A section of the annual meeting. In Buffett’s view, the range of potential outcomes from the pandemic and

This article was written by

Gary Gambino profile picture
I am a Chemical Engineer by training and have an MBA with concentrations in Finance and Operations Management. I retired early after 22 years in the energy industry with roles in engineering, planning, and financial analysis. I have managed my own portfolio since 1998 and have met my goal to match the S+P 500 return over the long term with lower volatility and higher income yield. I plan to focus my writing on positions I already hold or am considering changing, however my bias is toward long-term holding unless there is a very compelling reason to sell.

Analyst’s Disclosure: I am/we are long BRK.B. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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