(Bloomberg) — At Berkshire Hathaway Inc.’s annual meeting Saturday in Omaha, Warren Buffett praised Apple Inc. — after revealing he had reduced his stake in it.
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Berkshire reported a $135.4 billion stake in the iPhone maker at the end of the first quarter, down from $174.3 billion at the end of the year. The move quickly became one of the biggest topics during the meeting, even though Berkshire had sold some shares of Apple in the previous quarter.
Despite the sale, Apple is “even better” than American Express and Coca-Cola, both “wonderful” companies that are also owned by Berkshire, Buffett told thousands of people in Omaha. Unless something dramatic changes, Apple will remain his largest investment, he said, suggesting that tax implications were the reason for the sale. The iPhone may be one of the greatest products of all time, Buffett added.
Apple has faced a lot of headwinds – a $2 billion antitrust fine, declining sales in China and the scrapping of a decade-long car project. The company’s shares have fallen about 5% this year.
The sale bolstered Berkshire’s cash holdings, which climbed to a record $189 billion at the end of March. Given current market conditions — interest rate cuts are uncertain, inflation remains high and geopolitical risks abound — Buffett said he doesn’t mind piling on the money, saying it could reach $200 billion by the end of the quarter .
Cash on hand also benefited from higher interest rates, generating interest income of $1.9 billion compared to $1.1 billion in the year-ago quarter.
Berkshire’s cash pile has grown amid a lack of major deals. Buffett said Saturday he had been unable to find recent acquisitions that would be “a game-changer” for the company. Investors also took it as a sign of his view on the stock market.
“Buffett is hoarding cash and is therefore bearish on the stock market,” said Bill Smead, chief investment officer at Smead Capital Management. “He is unlikely to use these funds unless he has the chance to buy an entire company or there is a major market sell-off of 30% or more.”
Here are some other key takeaways from Berkshire’s annual meeting and results:
Increase in profits
In a sign that the U.S. economy remained robust at the start of the year, the conglomerate’s companies – including manufacturers, home builders, insurance companies and retailers – generated operating profit of $11.2 billion, up 39% from a year ago .
Improved results in insurance operations contributed to the increase, generating $2.6 billion compared to $911 million in the same period last year. At its auto insurer Geico, pretax profit more than doubled to $1.93 billion, reflecting higher average insurance premiums and lower claims, Berkshire said in its earnings release. The company returned to profitability last year after suffering consecutive quarters of losses.
“There’s still a lot of work to do, but in the meantime we’re not going to shrink,” Buffett said of Geico.
Berkshire’s rail unit BNSF reported an 8.3% drop in profit compared to the previous period, which Berkshire said was due to “unfavorable changes in the business mix” as well as lower revenue from fuel surcharges.
Climate, forest fires
Berkshire’s PacifiCorp reported estimated projected pretax losses of $2.4 billion from wildfires that spread across Oregon and California. About $1.7 billion of that has not yet been paid out, Berkshire said in its earnings report.
PacifiCorp faces liability claims from the fires, and damages sought by plaintiffs in Oregon and California totaled about $7 billion at the end of the first quarter, Berkshire said. At the annual meeting, Greg Abel — Buffett’s appointed successor and vice chairman of Berkshire’s non-insurance business — referred to an additional $30 billion lawsuit filed last week, although he described it as “an additional lawsuit” to an existing lawsuit designated.
The absence of Charlie Munger, Buffett’s longtime business partner who died in November at age 99, cast a shadow over the meeting, which began with a tribute film with a highlight reel of Munger’s famously bitter one-liners.
Buffett said the two had “a lot of fun doing everything” – he pointed to golf and tennis – but they had even more fun “doing things that failed, because then we had to really work and work our way out of them.” “
At one point, Buffett mistakenly called Abel “Charlie” when addressing him, answering a young attendee’s question about what he would do if he spent another day with Munger. Buffett replied that he would have spent it the same way as other days.
“He went everywhere with his mind, and so at 99 he was not only interested in the world, but the world was interested in him,” Buffett said of Munger.
Succession
Buffett referenced his own mortality throughout the day as the question of succession kept coming up. The billionaire investor assured Berkshire shareholders that the company’s future was in good hands. Abel – who knows companies “extremely well” – should take over Buffett’s capital allocation when he is gone, he said.
“If you have someone like Greg and Ajit, why do you settle for me?” Buffett said, also referring to Ajit Jain, Berkshire’s vice chairman of insurance operations. “It worked out very well.”
Buffett also repeatedly cited leadership changes at Apple and pointed to the strong leadership of CEO Tim Cook, who succeeded Steve Jobs.
“Buffett has made it very clear that the structure of the company is in place,” said J. Dennis Jean-Jacques, founder and chief investment officer of Ocean Park Investments, who first attended the meeting in 2000. “It’s becoming increasingly important for shareholders to make sure the board and managers are keeping the structure intact – they’re smart people and aren’t afraid to write to the CEO to let him know things are going wrong. “
Paramount Global
Berkshire also sold its stake in Paramount Global at a loss, Buffett said, adding that he was responsible for the investment. The company has faced challenges as viewers switched from traditional television to online offerings and is currently the subject of acquisition discussions.
“I did it all myself, guys,” Buffett said.
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