Berkshire Hathaway goes on a $51 billion shopping spree

For the last 5-6 years, Warren Buffett had complained that there were not enough attractive buying opportunities in the stock market. As a result, Buffett always preferred to sit on a pile of cash. The only thing he bought (or rather bought back) were the shares of Berkshire Hathaway.

According to Buffett, buybacks remain the best way to reward shareholders at a time when there are not enough opportunities. Shareholders get a bigger share of your assets. However, things appear to have changed course in the Mar-22 quarter.

While the cash pile of Berkshire had stood at $147 billion as of Dec-22, the cash pile had receded to just $106 billion at the close of March 2022. Obviously, the fall in cash reserve by $41 billion clearly indicates that Berkshire has been on a buying spree during the March 2022 quarter.

The revenues of Berkshire were higher by 10% but profits fell sharply due to lower insurance earnings and due to pressure of MTM losses on parts of its portfolio.

The total investment by Berkshire in the March quarter was approximately $51 billion, which comprised of $41 billion by way of using up the cash reserves while another $10 billion came from sale of shares.

It would be interesting to see how Berkshire Hathaway spent this $51 billion during the quarter and what are the stocks that it bought and sold during the quarter. Apple remains the biggest holding, but we come back to that later.

After a long time, Buffett slowed down his share buyback enthusiasm, which halved to $3.2 billion on a sequential quarter basis. In the last 5 quarters, Berkshire had spent $6 billion buying back the stock of the company in each of these quarters.

During the quarter, the company bought stocks worth $51 billion after being net sellers through all the quarters of 2020 and 2021. Let us look at some of the major stock accretions for Berkshire Hathaway.

Between Dec-21 and Mar-22, Berkshire Hathaway’s holdings in Chevron went up from $4.5 billion to $26 billion, implying an increase of $21.5 billion. In addition, Berkshire Hathaway bought $7 billion of Occidental Petroleum shares, $4 billion of Hewlett Packard shares and finalized a controlling stake in Alleghany Corporation for $11.6 billion in under two weeks. These four stocks accounted for overall purchases of $44 billion or bulk of the funds that Berkshire made in the March 2022 quarter.
 

What did Berkshire do with Apple?

Berkshire has confirmed that they bought a bit of Apple. Let us look at it this way. Out of the total of $51 billion, a sum of $44 billion was used by the four stocks viz. Chevron, Occidental Petroleum, Hewlett Packard and Alleghany Corporation.

Of the balance $7 billion, a sum of $3.2 billion was used up for Berkshire buyback of shares. The balance was allocated to Activision (likely to be bought by Microsoft) and Apple. On a net basis, the investment in Apple in the quarter would have been quite small.

Berkshire owned 908 million shares of Apple as of the close of Dec-21 quarter worth $161 billion. In Mar-22, the Apple stake was worth $ $159 billion but that was largely on the back of a fall in stock price of Apple. Apple remains the most predominant stock at $159 billion accounting for 41% of the total Berkshire portfolio of $391 billion.

The Apple stock is up 4-fold since Berkshire first bought the stock way back in 2016.
However, the big story remains the fresh purchases made by Berkshire in the quarter indicating that Buffett is finally seeing value in this market.