Billionaire investor Warren Buffett, whose Berkshire Hathaway Inc is being hit hard by the coronavirus pandemic, posting a record quarterly net loss of nearly $50 billion on Saturday said the United States’ capacity to withstand crises provides a silver lining as it combats the coronavirus, even as he acknowledged that the global pandemic could significantly damage the economy and his investments.
Buffett is considered one of the savviest investors anywhere. His fortune of $72 billion is the fourth-largest in the world, according to Forbes
Over more than 4-1/2 hours at the annual meeting of Berkshire Hathaway Inc, Buffett said his conglomerate has taken many steps responding to the pandemic, including providing cash to struggling operating units, and throwing in the total on a multi-billion-dollar bet on U.S. airlines.
The meeting was held virtually for the first time because of the pandemic, without shareholders in attendance, and streamed by Yahoo Finance.
Buffett and Vice Chairman Greg Abel, 57, spent nearly 2-1/2 hours answering shareholder questions posed by a reporter.
Berkshire said most of its more than 90 businesses have faced "relatively minor to severe" negative effects from Covid-19, the illness caused by the novel coronavirus, with revenue slowing considerably in April even at businesses deemed "essential."
The BNSF railroad saw shipping volumes fall, Geico set aside money for car insurance premiums it doesn't expect to collect, and some businesses cut wages and furloughed workers. Retailers such as See's Candies and the Nebraska Furniture Mart closed stores.
Buffett also allowed Berkshire's cash stake to rise to a record $137.3 billion from $128 billion at the end of 2019.
That reflected the 89-year-old billionaire's inability to make large, "elephant" size acquisitions, now in its fifth year, and caution in buying more stocks. Berkshire repurchased $1.7 billion of its own stock.Buffett also said he remains keen on making a big acquisition, which he has not done since 2016, but has not provided financial support to companies as he did during the 2008 financial crisis because he saw nothing attractive enough, even after the recent bear market.
The 89-year-old opened the meeting in Omaha, Nebraska with 1-3/4 hours of remarks to soothe anxious investors, urging them to stay committed to stocks despite this year’s bear market, even if the pandemic gets a second wind late this year.
Illustrating his remarks with dozens of plain black-and-white slides, Buffett called dealing with the pandemic “quite an experiment” that had an “extraordinarily wide” range of possible economic outcomes.
But he said Americans have persevered and prospered through such crises as the Civil War in the 1860s, the influenza pandemic a century ago and the Great Depression. American “magic” prevailed before and would do again, he said.
“Nothing can stop America when you get right down to it,” Buffett said. “I will bet on America the rest of my life.”
Abel has day-to-day oversight of Berkshire’s non-insurance businesses, and is considered by many analysts and investors a top candidate to eventually succeed Buffett as chief executive.
Buffett confirmed that Berkshire in April sold its “entire positions” in the four largest: American Airlines Group Inc, Delta Air Lines Inc, Southwest Airlines Co and United Airlines Holdings Inc.
Buffett said he “made a mistake” investing in the sector, which the pandemic has changed “in a very major way” with no fault of the airlines, leaving limited upside for investors.“It is basically that we shut off air travel in this country,” he said.Vice Chairman Ajit Jain, 68, who oversees Berkshire’s insurance businesses and is also considered a possible CEO candidate, was also absent from the meeting. Abel lives closer to Omaha than Munger and Jain.
Berkshire has said its board of directors knows who would become CEO if Buffett died or became incapacitated.
Buffett’s eldest son Howard would likely become non-executive chairman, and portfolio managers Todd Combs and Ted Weschler could succeed Buffett as chief investment officer.
Abel told investors “I don’t see the culture of Berkshire changing” after Buffett and Munger are no longer there.
He also said Berkshire was likely to expand its workforce, which totaled 391,539 people at year end, even though some businesses have furloughed employees and cut salaries since the pandemic began, and could start resorting to layoffs.
Berkshire wouldn’t be alone. Nationwide jobless claims have since March 21 totaled about 30.3 million, or 18% of the workforce, a level not seen since the Great Depression.