Berkshire 2020 Q1 Results

[vinod1]

Q1 results are out. Pretty much in line. Trimmed equities by $4 to $6 billion. No big buys.

 

https://www.berkshirehathaway.com/qtrly/1stqtr20.pdf

 

Vinod

[thepupil]

I see that he purchased $4billion and sold $2.1 billion. Where do you see he trimmed $4-$6B?

 

By the way, the realized gains are a large percentage of the sales proceeds. He is selling very profitable lots, maybe KO or 1990’s WFC?

 

Bloomberg:

 

Buffett Stays on Sidelines With Cash Pile Rising to $137 Billion

 

Saturday, May 2, 2020 08:11 AM

By Katherine Chiglinsky

 

(Bloomberg) --Warren Buffett’s Berkshire Hathaway Inc. spent the first quarter building up cash as the coronavirus slowdown started to grip the U.S.

Berkshire ended the period with $137 billion of cash, a record for the conglomerate. That was up almost $10 billion from the end of 2019, while the famed investor spent just a net $3.5 billion buying shares of his and other companies.

Key Insights

 

Buffett, Berkshire’s chairman and chief executive officer, has been on the hunt for higher-returning investments such as acquisitions or stock purchases for years, but has struggled amid what he called “sky-high” prices.

Buffett will host Berkshire’s annual meeting virtually on Saturday, starting at 3:45 p.m. in Omaha with key deputy Greg Abel by his side. Buffett’s longtime business partner, Charlie Munger, won’t be in attendance. Follow the TopLive blog here.

Berkshire’s first-quarter net income plunged to a loss of $49.7 billion, driven by unrealized losses in the massive stock portfolio.

Berkshire bought $1.8 billion of stocks on a net basis in the period as the market plunged amid widespread fallout from Covid-19.

Berkshire took a more cautious approach to stock buybacks in the first quarter, repurchasing just $1.7 billion. It spent a record $2.2 billion on buybacks during the last three months of 2019.

Market Reaction

 

Berkshire’s Class A shares have dropped about 19% this year through Friday’s close, worse than the 12% decline in the S&P 500 over the same time period.

[rb]

The buyback absolutely SUCKED!

[vinod1]

You are right. I misread it. Too early in the morning. Looked at the negative sign in CFI and mentally filed it away as sales. :)

 

Vinod

[gfp]

He didn't sell any more Wells - 345 million shares (aprox) at quarter end.  Doubt he touched coke either but haven't checked yet (edit: KO unchanged at 400m shares).  Apple shares basically unchanged for the quarter as well.  Previous to Q1, he had been selling Wells voluntarily - not due to 10% reasons.  But he stopped.

 

thepupil has it right - added $4 B and sold $2.1.  and plenty of profitable lots along with the tax loss selling.

 

It does not appear that Berkshire expects to record a large insurance loss due to COVID

 

Repurchases totaled $1.7 B worth, but we already knew about $1 Billion worth from the proxy statement share count. 

[redskin]

He sold $6 billion of equities in April.

[gfp]

He sold $6 billion of equities in April.

 

Good catch - I see that now.  Sold $6.1 Billion net of purchases for the month of April.

[CorpRaider]

His actions jibe with Charlie's words.

[wescobrk]

He bought more last quarter when he commented Berkshire wasn't that cheap (I believe a 95 cent dollar?)

This was worse than I thought regarding taking advantage of the drop.

 

Well, when there is a 2nd wave, hopefully he will be more aggressive.

 

I wonder if Ted and the other chap was aggressive.

[Mephistopheles]

He sold $6 billion of equities in April.

 

Good catch - I see that now.  Sold $6.1 Billion net of purchases for the month of April.

 

Probably the airlines

[Gregmal]

While its disappointing, as someone who invests with a focus on great assets and great managers, I'm probably best served pushing aside the disappointment and realizing that Buffett will be Buffett and if thats why I bought Berkshire, then I shouldnt really be complaining(although many times I do anyway)...

[longterminvestor]

Small item caught my eye. 0.2% increased ownership in BH Energy business. Ownership split has always been 90.9% and shown now at 91.1%.  Wahoo, I’m so starved for deals I’m getting excited about 2 beeps increase in equity!!

[gfp]

Small item caught my eye. 0.2% increased ownership in BH Energy business. Ownership split has always been 90.9% and shown now at 91.1%.  Wahoo, I’m so starved for deals I’m getting excited about 2 beeps increase in equity!!

 

Thats been an ongoing thing from the Walter Scott entities.  Another increase in ownership will come when Greg Abel converts his stake to Berkshire common shares.

 

https://www.fool.com/investing/2019/02/27/the-big-berkshire-hathaway-buyback-no-one-is-talki.aspx

[Drokos]

The buyback absolutely SUCKED!

 

Couldn't agree more. Turning it off after March 10th after buying shares at $226 in January is bizarre. BRK is in worse share than we think with the pandemic if he was worried about stockpiling the <$1 billion he would have spent in late March if he even just maintained the embarrassingly slow pace of buybacks from Q4/Jan-Feb. Very concerning.

[sleepydragon]

I guess this shows Buffett and Charlie think quite differently from most people on this board. That's why we are not as rich as them.

[buffetteer1984]

I can see fund managers unloading their positions in berkshire after this.  Buffett repurchased shares in the 220s but completely stopped as the shares have languished sub 200.  He sold airlines but didn't redeploy that capital.  Now cash pile is more than 25% of market cap.  I don't see a reason for not at least dabbling daily in just repurchasing shares.  He's behaving like most CEOs people crucify for buying back shares ie when prices are high but not when they're lower.

[Xerxes]

Haven't gone through the details, i would just say that i am glad that Buffet and Munger continue to manage the company with an eye for the next 50 years as they see fit (yes i am aware that they are old), as oppose to satisfying either Wall Street or us or anybody else with their quarterly results expectation and how much they bought back or didn't.

 

I don't own Berkshire as one of my largest position, because i wanted them to do the things that i would want to do myself. (i.e. buying the dip). The reality is while we worry about covid-19 and how 2021 looks like and all the obvious things, you would want someone else to  worry on your behalf about 2030 and beyond and not do all the things that look obvious.

[obtuse_investor]

Very lacklustre on repurchase front. This will disappoint the market.

 

I am not surprised though. I have long maintained that  Buffett is playing the very long game (which will long surpass his own expiry date). While market has basically discounted COVID-19 already, Buffett is likely thinking much longer term. Almost all scientists agree that we are in for the long haul of virus induced disruption. Market isn’t discounting that (yet).

[Xerxes]

I guess this shows Buffett and Charlie think quite differently from most people on this board. That's why we are not as rich as them.

 

 

Very true, i would echo your comment by this quote.

 

“There are two kinds of forecasters: those who don't know, and those who don't know they don't know.”

 

I believe most folks, including myself, fall in the second bucket.

 

[ERICOPOLY]

He's behaving like most CEOs people crucify for buying back shares ie when prices are high but not when they're lower.

 

Returning excess cash to shareholders when they don't know when it will stop coming in the door (could be many years).

 

vs.

 

Conserving capital when times are hard and you are uncertain as to when it will come flooding in again.

[vinod1]

Buffett is behaving just like as had in the past. He is pretty consistent in that respect. Did not buy in 2008/9 nor in any of the dips. From where he sits, putting a few billion here and there during a dip, does not move the needle and he does not even bother.

 

Assume instead that the S&P 500 slowly fell down to say 2000 from late February till today. Would that change your view of how Buffett acted the past couple of months?

 

Vinod

[thepupil]

Buffett is behaving just like as had in the past. He is pretty consistent in that respect. Did not buy in 2008/9 nor in any of the dips. From where he sits, putting a few billion here and there during a dip, does not move the needle and he does not even bother.

 

Assume instead that the S&P 500 slowly fell down to say 2000 from late February till today. Would that change your view of how Buffett acted the past couple of months?

 

Vinod

 

Agree completely. And just because he’s not doing much, doesn’t mean we shouldn’t be. It’s a data point, but surely everyone’s 6-7 figure (maybe some 8’s) balance sheet and capital structure and mandate may be different than a $700B asset insurance/holding company.

 

I own Berkshire. I’m fine with him piling cash.

I own Pershing Square, I’m fine with him doubling down on his restaurants and hotels in March.

I own Vornado; I’m fine with them investing 1/3 of their market cap in mult-decadal commercial development atop one of the most dense transport hubs in the world (the ultimate covid fade)

 

Let people do what makes sense for their business and do what makes sense for you. I have little cash. My retired parents have a lot of cash and fixed income. There’s no one truth or absolute or right thing to do for every actor.

 

Maybe that’s just me saying “I’m entitled to have no opinion and just blindly buy discounts and have no real philosophy or conviction.”

 

[buffetteer1984]

Buybacks are implemented to extract value for long term shareholders.  If buffett thought it was good to buy berkshire at 220 then why not 160?  I would have less concerns if he just didn't buy at all.  If markets fell to 2000, what would brk/b fall to? 150? 140? If he didn't buy back shares at 160 why would you think he'd do it at 150?  As a long time shareholder i'd be equally happy if he buys at 170, 180, 190, 200 cause he clearly thought the price at 220 was less than intrinsic value.  The other thing to ask is liquidity issues.  I would have no issues if berkshire stood pat cause of that.  But 25% of market cap seems excessive.  Why not just flip the airline equities into buybacks at the least.

 

Buffett is behaving just like as had in the past. He is pretty consistent in that respect. Did not buy in 2008/9 nor in any of the dips. From where he sits, putting a few billion here and there during a dip, does not move the needle and he does not even bother.

 

Assume instead that the S&P 500 slowly fell down to say 2000 from late February till today. Would that change your view of how Buffett acted the past couple of months?

 

Vinod

[Cigarbutt]

...

“There are two kinds of forecasters: those who don't know, and those who don't know they don't know.”

I believe most folks, including myself, fall in the second bucket.

You realize (do you?) that your statement, as phrased, could be a source of mental anguish.

 

Perhaps helpful to use the Brooklyn Investor's lens (no this is not a post about market timing, or is it?):

http://brooklyninvestor.blogspot.com/2017/11/is-buffett-bearish.html

Using similar methodology and incorporating the latest released data, the coverage stands at 117-8%.

Maybe helpful to remember that 1997 and 1998 were special years, as GenRe was acquired and BRK picked up 19B of bonds as part of 15B of float (unaudited, from handwritten notes). So 1999 may be a better year for comparison (pro-forma if you like), especially keeping in mind some of the comments made then.

i think Mr. Buffett was made aware of this coverage data and apparently said that it happened to be a fortuitous correlation.Perhaps fortuitous but interesting nonetheless..

When he purchased GenRe, he had mentioned that he was "creating Fort Knox here". Perhaps 2020 is a time when we are collectively running out of Fort Knoxes.

[scorpioncapital]

There is , I agree, a certain belief that one must get in at the bottom of some crash to outperform. Timing the market. Actually beside the fact you don't know the bottom, or the top , timing the market may not be so important. Berkshire is a giant company so waiting for more clarity, then acting can produce great results even without buying in at the bottom of anything. It really goes back to the idea of look to internal scorecard than external market moves. Maybe he sees danger. Maybe he sees no reason to rush.