MOJO: On Saturday Berkshire Hathaway (BRK.B), the largest US non-tech company, will host its ‘carnival of capitalism’ annual meet live from Omaha for the first time since 2019. It will be Warren Buffett’s 62nd year as CEO, and he’ll be alongside partner Charlie Munger, and next CEO Greg Abel. Berkshire is getting its performance (see chart) and deal-making mojo back. Its contrarian and Value style is being rewarded as the tech-led sell-off has accelerated. Lower markets and valuations play to Buffett’s be ‘greedy when others are fearful’ mantra and $100+ billion cash pile. Our allocation ‘barbell’ is similarly focused on cheap cyclicals and defensives.
COMEBACK: Berkshire stock has outperformed the S&P 500 near 30% this year, as its Value investment style made a big comeback. The hodgepodge portfolio is led by insurance (GEICO, Gen Re), rail (BNSF), and utilities (BHE), and big 6% stake in Apple (AAPL), 20% American Express (AXP), 13% Bank of America (BAC), and 9% Coke (KO). Buffett has become more acquisitive lately, with the $12 billion takeover of insurer Alleghany (Y) and big new stakes in Occidental (OXY) and HP (HPE). But this still leaves over $100 billion of ‘dry powder’ cash.
LONG VIEW: Berkshire’ stock has tracked the S&P 500 for the last decade, an achievement given the index rally. But disappointing for those used to the 20% compound annual gain since 1965, double the S&P 500. Berkshire has seen strong value in itself, ramping share buybacks last year to a huge $27 billion, and consistent with why it doesn’t pay a dividend, unlike 80% peers.
All data, figures & charts are valid as of 26/04/2022