Buffett Is Buying, But It's Not a Big Bet on the Market

Berkshire Hathaway's annual shareholders meeting took place over the weekend, along with the usual in-person festivities after a two-year pandemic hiatus. Tens of thousands of Warren Buffett fans flocked to eastern Nebraska to hear from the Oracle of Omaha himself, as millions more watched online. I was there to cover it all for Barron's.

Berkshire stock is handily beating the market this year: it's up about 7%, while the S&P 500 has declined roughly 13%. Buffett was in a good mood at the gathering, cracking jokes, taking shots at investment bankers and Robinhood traders, and explaining his latest investments.

After sitting out most of the late-2020 and 2021 bull market, Berkshire bought big in the first quarter, spending some $51 billion on equities and selling less than $10 billion. That came as the stock market stumbled and declined. But don't interpret Buffett's moves as a bullish signal for the broader market.

Instead, those record quarterly purchases are the application of his signature value investing style and his focus on simple and easy-to-understand theses on individual stocks.

Among Berkshire’s largest buys in the first quarter were Chevron and Occidental Petroleum. Those are both big oil producers, with generous cash-return plans. Both stocks carry valuation multiples well below the S&P 500 average. Buffett likes companies that buy back a lot of stock and pay big dividends. Share buybacks mean Berkshire’s ownership stake will rise over time, while dividends throw cash back to the parent company to redeploy elsewhere. 

“If you do it at the right price, there’s nothing better than buying back part of your own business,” Buffett said at the meeting on Saturday.

Those energy buys weren’t even contrarian in the first quarter: Chevron stock returned 40% including dividends, while Occidental soared 96%.

Another Berkshire mega-purchase in the first quarter was the $11.6 billion deal to buy Alleghany. That’s a horizontal acquisition in the insurance industry, with the property-and-casualty reinsurer sliding into Berkshire’s insurance operations. There’s no macro market bet in there either.

Buffett revealed on Saturday that Berkshire had increased its stake in Activision Blizzard to about 9.5% since the start of 2022. It’s hard to imagine the 91-year-old Buffett being a big videogame enthusiast, and, sure enough, the Activision bet doesn’t have anything to do with the business—it’s a merger-arbitrage play.

Buffett expects the videogame maker's stock—which has been trading in the high $70s and low $80s in recent months—to rise to the $95 that Microsoft has agreed to pay to acquire it. Once again, it’s a straightforward, company-specific thesis.

Other purchases by Berkshire in the quarter included an 11% stake in HP—another cheap stock with a big shareholder return program—Apple, and several banks where the company already has large stakes. That’s doubling down on what Buffett already knows and likes.

All together, the news that the legendary value investor spent a net $41 billion buying stock in the first quarter despite market declines sounds like a bullish signal. But the details of the moves are classic Buffett—and he has never been one for making macro bets.

Read Barron's coverage of Berkshire's first-quarter results and the annual shareholders meeting.