Warren Buffett Is Making Up For Lost Time
Not only did Warren Buffett, Berkshire have subpar earnings last quarter, but during their annual shareholder meeting in May, also took some heat for hoarding all that cash he was sitting on…$128 billion to be exact. Even during the market crash in Feb./March, many investors and Wall Street were caught off guard by because Buffett didn’t make any significant share repurchases in the first quarter.
Actually, Buffett added to the cash pile in the second quarter when Berkshire Hathaway disclosed that it sold large blocks of stock in Delta Air Lines and Southwest Airlines. During Berkshire’s annual shareholders’ meeting, Warren Buffett said the world has changed because of the COVID-19 and that he had been wrong to invest in the airline industry. As a result, his company sold its stake in American airline companies which consisted: 11% stake in Delta Air Lines, 10% of American Airlines, 10% of Southwest Airlines, and 9% of United Airlines.
Buffett was now sitting on $137 billion of cash. But Berkshire’s annual shareholder’s meeting, Buffett told investors, "that nothing can basically stop America, the American miracle, the American magic has always prevailed and it will do so again.” And in recent weeks, Buffett has been making up for lost time.
Last month Buffett spent $4 billion to buy the natural gas transmission and storage assets of Dominion Energy. Including the assumption of debt, the deal totals almost $10 billion. It’s Berkshire’s first major purchase since the coronavirus pandemic and subsequent market collapse in March.
For Dominion, the move is part of its transition to a pure-play regulated utility company that focuses on clean energy production from wind, solar and natural gas.
For Berkshire, the move greatly increases its footprint in the natural gas business. With the purchase, Berkshire Hathaway Energy will carry 18% of all interstate natural gas transmission in the United States, up from 8% currently.
In late July Buffett bought shares in Bank Of America two different times in a span of one week. A Securities and Exchange Commission filing showed Buffett buying 33.9 million shares of the banking giant between Monday and Wednesday between July 23rd and July 30th. Berkshire now holds 1.02 billion BofA shares worth more than $25 billion, making it Berkshire’s second-largest equity holding behind Apple.
Berkshire’s Class A shares, which fell in line with the S&P 500 in the first three months of the year as the pandemic spread in the U.S., fell another 1.7% last quarter while the broader index rallied 20%. Buffett said in early May that repurchases weren’t more compelling than at previous times, but the buybacks in the quarter suggest his thinking shifted.
The famed investor spent a record $5.1 billion buying back Berkshire’s own stock in the second quarter, more than double the amount he’d ever purchased before. That came as he unloaded almost $13 billion of other companies’ shares
Now, if I go based on the Buffett Indicator, which is the sum total of the market capitalization of all U.S. stocks relative to the nation's GDP, the buying spree doesn't make sense.
But I guess I have to remind myself of what Buffett said at his annual shareholder’s meeting, "that nothing can basically stop America, the American miracle, the American magic has always prevailed and it will do so again.”
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted Using LeoFinance
