As war broke out in Europe and U.S. inflation soared, Berkshire Hathaway Inc.’s Warren Buffett was doubling down on a tried-and-trusted strategy to navigate the fallout.
The billionaire investor went on his biggest stock-buying spree in at least a decade, undeterred by the geopolitical turmoil and fears of runaway inflation. He and his deputies dug deeper into the U.S. stock market and expanded the conglomerate’s stakes in Chevron Corp. and Activision Blizzard Inc., even as Buffett acknowledged the “extraordinary” price increases in Berkshire’s businesses.
Buffett, who held court in Omaha, Nebraska, on Saturday at Berkshire’s annual shareholder meeting, had faced questions about why he didn’t take advantage of the downturn when the pandemic took hold. Now, as war and inflation fuel market volatility, prompting the S&P 500’s worst quarter in two years, he’s ramped up amid the uncertainty, making $41 billion in net stock purchases in the first quarter. That’s the most in data going back to 2008.
“As long as Buffett and his team are paying reasonable prices for quality companies, these investments should do well in any environment — inflationary or otherwise,” said Darren Pollock, a Berkshire investor who’s a principal at Cheviot Value Management LLC. They reflect “the sheer volume of cash coming into Berkshire’s coffers along with what we think is becoming an increasingly obvious desire to get out of cash as inflation becomes more ingrained.”
Buffett said he couldn’t predict the trajectory of inflation over the coming months or years, though he said he’s seen price increases across his businesses. He also conceded — as he’s done before — that his firm hasn’t always been good at timing its asset purchases, though it’s been “reasonably good at figuring out when we were getting enough for our money.”
On the home front, Berkshire let up on one of its key capital deployment levers, signaling buybacks aren’t quite as attractive to the firm right now. Still, the $3.2 billion of repurchases it did make, coupled with its other investments, helped shrink the conglomerate’s cash pile to roughly $106 billion — a sum that’s still above Buffett’s preferred margin for safety.
Berkshire’s stake in Chevron, which totaled nearly $4.5 billion at the end of 2021, hit $25.9 billion at the end of March, according to its first-quarter regulatory filing.
Buffett again addressed the impact of inflation, after warning shareholders last year that the economy was red hot. Inflation hurts bondholders, as well as people who stash cash under couches.
“It swindles almost everybody,” Buffett said. “If you really could have a totally stable unit of monetary use for the next hundred years, it would be better for business and investors in general.”
Berkshire’s businesses haven’t been immune to the pressures. Dairy Queen CEO Troy Bader said in an interview on Friday that it’s a real challenge. Brooks Sports Inc. CEO Jim Weber acknowledged the effects on his business, which makes running shoes, but expressed some optimism that the supply challenges and inflation pressures that have weighed on the economy will lessen.
“There’s been such a bubble in demand post-Covid, people have been buying stuff at an incredible rate,” Weber said. “It isn’t going to crash, I believe, but it’s going to normalize. And when it normalizes, I think all of this capacity challenge in the supply chain is going to go back to normal. I think some prices may be more attractive because there’s going to be overcapacity.”
Buffett and Munger have been constant skeptics of cryptocurrencies, with Munger calling it a “noxious poison.” The pair aired their deep criticism again on Saturday.
“What would I do with it?” Buffett said of cryptocurrency. “It isn’t going to do anything.”