Warren Buffett finally found something to buy besides his own shares.
A string of investments, including big bets on big oil, resulted in more than $40 billion in net purchases during the first quarter, the most aggressive spree in at least a dozen years.
Buffett’s binge buying may help allay concerns that he and Charlie Munger were becoming complacent which, I’d gently note, tends to happen when people approach their personal centennials.
Berkshire’s cash pile swelled to almost $150 billion in Q3 2021, and barely budged during the final three months of the year. The figure (below) gives you some context.
“We found some things we prefer to owning Treasury bills,” Munger said.
One of those “things” is oil. Between them, Berkshire’s bets on Occidental and Chevron amount to a massive $40 billion gamble on crude. The conglomerate now has “just” $106.26 billion in cash and equivalents on its balance sheet, the least in more than three years.
A side effect (although Buffett wouldn’t characterize it that way) was a sharp deceleration in buybacks. He and Munger spent just $3.2 billion on Berkshire shares during the quarter (figure below).
That was the least in two years. In 2021, Buffett repurchased a record $27.1 billion in Berkshire stock, which implicitly meant that he and Munger believed the most compelling bet on the planet was a wager on themselves.
Berkshire hosted its first in-person shareholder meeting since the pandemic on Saturday. The event serves three main purposes. First, it’s an opportunity for Buffett to reiterate amorphous aphorisms that could just as easily apply to walking across the street as they could to investing. Second, it’s an opportunity for CNBC to indulge its penchant for obsequious coverage of capitalism’s most iconic duo. Third, and most importantly, it’s an opportunity for Munger to indulge his penchant for saying things that only a 98-year-old can get away with saying in public.
I’ll spare you the aphorisms. And you should spare yourself CNBC’s pandering. And I should spare you Munger’s crude admonishments, but I’d be lying if I said they aren’t occasionally entertaining. “It was disgusting and now it’s unraveling,” Munger said, of Robinhood, shares of which are plunging. He called the stock’s collapse an example of “God getting just.”
Relatedly, Munger took aim at what he and Buffett habitually deride as a tendency for market participants to view blue chips as poker chips. “It’s a mania of speculation,” Munger mused, chiding unidentified “people” who “know nothing about stocks” taking advice from brokers who, he charged, “know even less.”
Munger also advised anyone tempted to put Bitcoin in their retirement fund to “just say no,” likened Buffett to Odysseus, lampooned a proposal to split Berkshire’s chairman and CEO roles as a “ridiculous” idea originated by “some professor somewhere” and described America’s stock market as a “crazy casino” where “computers with algorithms trad[e] against other computers.” On that latter point, at least, Munger isn’t wrong.
He sells airlines at the low and buys oil at the highs… I suck at picking stocks but even I know oil stocks aren’t going to more than double again like ExxonMobil did from the lows… Won’t be following these two that’s for sure
!remind me of this in 5 years…
Right, I mean they lose so much money with their investments that one wonders how they have the money to buy more stuff.
Airlines wont be profitable for the foreseeable future, they still bleed cash just look at earnings… Their share price only recovered with the frenzy and government/fed support (when they sold they couldn’t have predicted the fed would step in like they did, the decision was still the right one from a financial perspective). Time will dillute airline shareholders (share offer after share offer). High running costs, low disposable income and business travel obliterated by online ways of working.
Commodities are in a perfect storm together with a rotation on from intangible assets (and derivatives) to real assets and in stable geographies as well as repricing of USD and all these currencies that have been printing crazy amounts of money in a finite world. We are likely in for a big rotation. If you think this maybe the top, put your seatbelt, there is a chance this could take off.
These guys don’t think in 0-2 year time horizons, they know they cannot nail perfect times (because no one can) so they think long term and ignore short term noise.
But sure ignore the worlds most successful fund, what have you got?
I’m not a Buffett fan, but obviously the focus on oil is a focus on dividend cash flow. In another month, as the casino crashes into a deeper dive, Buffett will build future value and then eventually put that dumb money into a super leverage position to buy during the various fire sales. Sure, gramps is slow, but there’s a lot of dumb money evaporating in the casino and he’s just playing it safe.
“Many oil and gas companies are also good income generators, offering attractive dividends. The energy sector yields 4.7%, compared to S&P 500?s 1.5% dividend yield. Chevron pays a 3.6% dividend.”
“Many oil and gas companies are also good income generators, offering attractive dividends. The energy sector yields 4.7%, compared to S&P 500?s 1.5% dividend yield. Chevron pays a 3.6% dividend.”
‘Many’ being a key word. Royal Dutch Shell traded in the 60’s and 70’s for years, while paying a good dividend. Investors and employees sunk their retirement funds into it as a ‘good income generator.’ It was a “never sell” stock.
Shell’s price crashed in March-April 2020 (along with most oil) and weeks after the CEO promised the dividend was safe it was slashed and remains under 1%. The price has still not recovered to its former levels.
9 months ago, it became clear to me that OPEC+ was going to get oil prices up to around $100/barrel and keep them there.
Add good dividends and buybacks to that and it seemed like a solid investment. It has been….
happy to see more investment in the sector.
I do feel a bit guilty, but oil isn’t going anywhere as long as I am alive.
Just keeping what I own (largely anchored with SPY and profitable big tech).
I don’t want to go down with the ship, but I am just not that worried.
It wasn’t that long ago that Warren was flopping around, breathlessly about derivatives being weapons of mass destruction. While he was talking out his backside, his entire reinsurance empire was based on the core innovations of derivative hedging and his warm embrace of any instruments or leverage or accounting chicanery he can get away with.
Thus, maybe his public relations efforts to ridicule crypto are hints that instead of Charlie and Warren exchanging depends and walker tips, they’re both buying up NFT ape assets and trading them like marbles on a playground.
That’s a little like the market being a crooked game, but the only game in town. He’s a great conman and if all the ladies swooning in his audience believe what he says, great, but I think he’s buying virtual condos for his apes grandkids.