Buffett Revs Up Deal Machine With Investors Set For Omaha Trek – ValueWalk Premium
Berkshire Hathaway Warren Buffett

Buffett Revs Up Deal Machine With Investors Set For Omaha Trek

Warren Buffett the dealmaker is back.

After hanging in the shadows for most of the pandemic, the billionaire investor and his deputies have been ramping up Berkshire Hathaway Inc.’s acquisition machine — snapping up shares of Occidental Petroleum Corp. and HP Inc. and striking an $11.6 billion deal to buy Alleghany Corp. The flurry of activity comes just as investors are set to flock to Omaha, Nebraska, for the conglomerate’s first in-person shareholder meeting since 2019.

Now on the prowl — and having yet to weigh in on a plethora of economic and business topics — Berkshire’s chief executive officer is setting up for a “very, very important meeting,” as he recently teased in an interview with Charlie Rose. Buffett’s relative lack of buying during the pandemic and his subsequent stepped-up efforts at the start of 2022 are spurring questions about his dealmaking outlook for the year ahead.

“I think that he regretted it and recognized that it was a missed opportunity,” Jim Shanahan, an analyst at Edward Jones, said of Buffett’s decision to keep to the sidelines during the pandemic. “Then, when we got this sell-off this year, which was related to geopolitical events primarily in Europe, I think that’s when he saw the opportunity.”

This year’s Omaha event on April 30 marks a return of the famous “Woodstock for Capitalists” that distinguishes Berkshire’s gathering from most other companies’ annual meetings. The day typically is a showcase for Berkshire’s many holdings — booths handing out See’s Candies, toy trains mimicking Berkshire’s railroad — as well as hours of commentary from Buffett, 91, his long-time business partner Charlie Munger, 98, and two key deputies — Greg Abel and Ajit Jain.

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Buffett has been able to draw a crowd to the meeting for years, even as the conglomerate introduced its first-ever webcast in 2016. But shareholders took a break from the pilgrimage over the past two years due to Covid-19, leaving open the question about how many will make the trek this year. Buffett said he’s expecting the highest turnout ever, although tourism group Visit Omaha said last week that hotels weren’t as busy as they had been in previous years.

One topic will be the billionaire’s thoughts on his recent deals. In March, the conglomerate disclosed that it had been buying shares in Occidental, the oil producer that it already invested in via a preferred stake and warrants. Berkshire agreed to buy Alleghany later that month, and then, in early April, the company reported that it held a roughly $4.2 billion stake in HP, driving the computer maker’s stock to a record the next day.

“Each one of those is sort of taking down the pool of deployable capital, alongside the fourth element, which was share repurchase,” said Tom Russo, whose Gardner Russo & Quinn owns Berkshire shares. “I think it shows a desire to kind of get some more paint on the canvas.”

Berkshire owns warrants in Occidental that can be turned into common shares at $59.62 a share. The stock has closed above that price at times in recent weeks, and Buffett’s renewed enthusiasm for the oil producer could prompt questions about his willingness to convert the warrants. The stock closed at $55.59 Wednesday.

The past few weeks have marked an easing of Berkshire’s high-class problem of having too much money and too few opportunities. Thanks in part to behemoth businesses such as the railroad and energy operations, the conglomerate throws off more cash than Buffett and his deputies can quickly put to work. That left the company with almost $147 billion in funds at the end of 2021.

One response has been to lean heavily into stock buybacks, with Berkshire repurchasing a record $27 billion last year. Buffett disclosed in his annual letter that the conglomerate kept buying more stock through the start of this year, with $1.2 billion of repurchases through Feb. 23. Berkshire will release its quarterly earnings report before the start of the meeting, giving investors a glimpse into whether the company maintained that buyback pace through the rest of the quarter.

Read the full article here by , Advisor Perspectives.

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