(Bloomberg) — At Berkshire Hathaway Inc.’s annual meeting. in Omaha last Saturday, 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, up from $174.3 billion at the end of the year. The move quickly became one of the main topics at the meeting, even though Berkshire had sold some shares in Apple last quarter.
Despite the sale, Apple is “even better” than American Express and Coca-Cola, two “wonderful” companies that Berkshire also owns, Buffett told the thousands of people in Omaha. Unless something changes dramatically, Apple will remain the largest investment, he said, hinting that the sale was motivated by tax implications. The iPhone may be one of the best products of all time, according to Buffett.
Apple has faced plenty of headwinds: a $2 billion antitrust fine, declining sales in China and the scrapping of a decade-long car project. The company’s shares are down about 5% this year.
The sale boosted Berkshire’s cash pile, which rose to a record $189 billion at the end of March. Given current market conditions — where rate cuts are uncertain, inflation remains high and geopolitical risks abound — Buffett said he didn’t mind raising the cash and said it could reach $200 billion by the end of the quarter reaches.
The money supply also benefited from higher interest rates, generating $1.9 billion in interest income, compared to $1.1 billion in the same quarter a year earlier.
Berkshire’s cash pile has grown due to a lack of sizable deals. Buffett said Saturday that he has been unable to find recent acquisitions that could change the company’s direction. Investors also saw it as a sign of his views 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 deploy these funds unless he has the opportunity to buy an entire company or there is a major market selloff of 30% or more.”
Here are some other key takeaways from Berkshire’s annual meeting and earnings:
Profit gain
In a sign that the U.S. economy remained robust to start the year, the conglomerate’s collection of companies – including manufacturers, homebuilders, insurance companies and retailers – generated $11.2 billion in operating profits, up 39% from the previous year .
Improved results in the insurance business contributed to the increase, earning $2.6 billion versus $911 million in the same period last year. At auto insurer Geico, pre-tax profit more than doubled to $1.93 billion, due to higher average policy premiums and lower claims, Berkshire said in its earnings statement. Last year the company became profitable after several quarters of consecutive losses.
“There is still work to be done, but in the meantime we are not going to shrink,” Buffett said of Geico.
Berkshire’s rail operator BNSF reported an 8.3% decline in profit from the previous period, which Berkshire said was due to “adverse changes in the business mix” and lower fuel surcharge revenues.
Climate, forest fires
Berkshire’s PacifiCorp recorded $2.4 billion in estimated probable pre-tax losses from wildfires spreading across Oregon and California. About $1.7 billion of that remains unpaid, Berkshire said in its earnings report.
PacifiCorp is facing 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 – pointed to an additional $30 billion claim filed last week, though he described it as “an incremental claim” on an existing lawsuit .
The absence of Charlie Munger, Buffett’s longtime business partner who died in November at the age of 99, put a damper on the meeting, which began with a tribute film highlighted by Munger’s famously biting one-liners.
Buffett said the two “had a lot of fun with whatever” — he was referring to golf and tennis — but they had even more fun “with things that failed, because then we really had to work and work our way out of it.”
At one point, Buffett mistakenly called Abel “Charlie” when he turned to him and answered a young visitor’s question about what he would do if he had one more day to spend with Munger. Buffett responded that he would have spent it the same way he would have spent any other day.
“He went everywhere with his mind, and so not only was he interested in the world when he was 99, but the world was interested in him,” Buffett said of Munger.
Succession
Buffett referenced his own mortality throughout the day as the issue of succession came up repeatedly. The billionaire investor assured Berkshire shareholders that the company’s future was in good hands. Abel – who understands companies “extremely well” – should take over Buffett’s capital allocation when he is gone, he said.
“When you have someone like Greg and Ajit, why settle for me?” Buffett said, referring to Ajit Jain, Berkshire’s vice chairman of insurance operations. “It turned out extremely well.”
Buffett also continued to call for leadership changes at Apple, pointing to the strong leadership of CEO Tim Cook, who took over from Steve Jobs.
“Buffett has made it very clear that the structure of the company is in order,” said J. Dennis Jean-Jacques, founder and chief investment officer of Ocean Park Investments, who first attended the meeting in 2000. “It is going to be increasingly important for shareholders to ensure that the board and managers keep the structure intact – they are smart people and are not afraid to write to the CEO to let them know that things are not going well. ”
Big global
Berkshire also sold its position in Paramount Global at a loss, Buffett said, adding that he was responsible for the investment. The company faced challenges as viewers switched from traditional TV to online offerings and is currently the subject of takeover talks.
“I did it all by myself, folks,” said Buffett.
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