Warren Buffett’s Berkshire bets big on US stock market

Warren Buffett’s Berkshire Hathaway bet big on the US stock market in the first quarter, buying $51.1bn of shares, as he ploughed the sprawling conglomerate’s cash pile to work as financial markets slid from record heights.

It is a dramatic shift from an investor who had been a seller of stocks for the past two years, warning of high valuations and little in the market that would generate substantive returns.

But global financial markets have weakened in recent months, as Russia invaded Ukraine and fears of a Chinese economic slowdown have rattled investor confidence.

That has offered him a more attractive entry, according to analysts and investors who have been warmed by the vote of confidence in the stock market from the so-called Oracle of Omaha.

The furious pace of stock purchases was enough to put a dent in Berkshire’s cash pile, which Buffett has often likened to a war chest. Its cash fell to $106.3bn at the end of March from just under $147bn at year end. The company’s first quarter report showed it had sold $9.7bn of stock during the period.

The report indicated Berkshire had sharply increased its ownership of energy company Chevron, listing its $25.9bn stake as one of its top five holdings in a stock portfolio now worth $390bn. The investment in Chevron accompanies billions of dollars worth of stock purchases in oil major Occidental and printer and computer manufacturer HP this year.

Buffett has burnished his dealmaking credentials in recent months after sitting on the sidelines for much of the pandemic era. In March he clinched an $11.6bn deal to take over insurer-to-toy manufacturer Alleghany.

The figures were disclosed on Saturday as tens of thousands of Berkshire shareholders descended on Omaha to hear from the billionaire investor at the company’s annual meeting, the first one held in person since 2019.

Berkshire reported net income of $5.5bn in the first three months of 2022, less than half the level generated a year earlier. The company’s results included a $1.6bn hit from losses on its investment and derivatives portfolio.

Excluding those swings, which Buffett has criticised as “usually meaningless” as US accounting rules require changes in the value of its investment portfolio to be included in quarterly results, the company reported operating earnings of $7.04bn. That was marginally above year ago earnings.

The results showed the company’s railroad, utilities and manufacturing businesses reporting stronger profits in the quarter, compared to year ago levels. But profits at its insurance businesses — which includes Geico — were nearly wiped out, falling to just $47mn from $764mn a year earlier.

Shares of the company have outpaced the US stock market this year, rising 7.5 per cent compared to a 13 per cent decline by the benchmark S&P 500.