I’m won’t lie: I stopped caring about Berkshire when Warren Buffett said he’s passing the torch.
And, as regular readers can attest, I didn’t care all that much about it in the first place.
But, I suppose the hedge fund’s — sorry, the conglomerate’s — quarterly results are worth a mention on Saturday if for no other reason than Berkshire’s cash pile hit yet another new record.
After falling in Q4, the total rose more than $24 billion during Q1 to reach $397.383 billion. So, almost $400 billion. In cash.
The new filing also shows Berkshire was a net seller of other stocks (i.e., stocks other than its own) for a 14th consecutive quarter.
Berkshire started buying back shares again in Q1 to the tune of about a quarter billion.
The stock peaked the week Buffett announced the leadership transition. It’s underperformed the Nasdaq 100 by — checks notes — 50ppt since then.
Good luck, Greg. I’m not sure when the phrase “big shoes to fill” was inaugurated, but I’m fairly confident in asserting these are the biggest pair of vacant sneakers in the history of that particular idiom.
IMHO, the only reason why Buffett turned over the reins is that his horse is old, as is he. There is very little left in which the firm might invest to improve its performance. It is the only firm in the world that owns a trillion in actual assets (not just market cap). It has 400 billion in cash but there is almost nothing to buy that can offer better returns and growth than the company already possesses. So now the new guy gets to do what he can to let his shareholders down easy. Oh, and by the way AI isn’t what is next.
If we get to the point that BH sees value, enough money would have rushed out of the market to make real asset prices explode higher, since interest rates probably won’t provide much incentive to hold cash, so more economics distortion from too much money in the system.
Their best option might be a slow paced liquidation.
Let’s give credit where it is due. If you are familiar with golf terminology, Warren Buffett is still the all-time leader “in the clubhouse.” In his time at Berkshire he managed an average annual return of nearly 20% — roughly double the S&P 500’s performance — over almost six-decades. That includes the 1970s, which was a very difficult time for markets:
“Between 1965 and the end of 2022, the S&P 500 advanced 24,708% compared to 3,787,464% for Buffett’s Berkshire.”
— U.S. News and World Report
I sincerely believe his methodology still works, but he struggled to identify companies that met his criteria for “values” in the current go-go era of big tech, AI, and easy Fed policy. Has the game passed him by? Maybe, but it would be nice to see how Berkshire would have performed under his leadership after the next big crash. Hopefully, Abel succeeds and is able to do so without having to completely dismantle Warren’s approach.
Reward the investors with dividends, and stop playing hero.