Warren Buffett struck some of his famous deals — taking lucrative stakes in Goldman Sachs Group Inc. and General Electric Co. — by swooping in when others panicked during the last financial crisis. He’s treading more carefully this time around.
With a record $137 billion of cash piled up at his Berkshire Hathaway Inc., Buffett fielded questions over the weekend from shareholders who wanted to know why he hadn’t acted as companies clamored for liquidity amid the pandemic-related shutdowns. This crisis is different, Buffett said.
“We have not done anything because we don’t see anything that attractive to do,” Buffett said at his annual shareholder meeting, which was held by webcast.
The deals in 2008 and 2009 weren’t done to make “a statement to the world,” he said. “They seemed intelligent things to do and markets were such that we didn’t really have much competition.”
The famous investor’s reputation allowed him to serve as a lender of last resort during the 2008 financial crisis, racking up deals that generated 10% annual dividends from household-name companies.
But as panic about the virus and shutdowns assaulted equities in March and even began to freeze debt markets, the Federal Reserve beat him to the punch with an unprecedented set of emergency measures.
“There was a period right before the Fed acted, we were starting to get calls,” Buffett said at Saturday’s meeting. “They weren’t attractive calls, but we were getting calls. And the companies we were getting calls from, after the Fed acted, a number of them were able to get money in the public market frankly at terms we wouldn’t have given.”
Buffett’s cautious reaction to the latest crisis drew plenty of attention from investors. While Berkshire bought back $1.7 billion of its shares in the first quarter, it was a net seller of stocks through April as it shed stakes in four major U.S. airlines.
The approach seems to put him in the camp of other notable investors who think markets may not have seen the worst of the impact from the pandemic.
Buffett said the prospect of buying back Berkshire’s own stock isn’t much more attractive than it was in January, even as the share price dropped.
“He received much more demanding questions,” said Tom Russo, who oversees investments including Berkshire shares at Gardner Russo & Gardner LLC.
Dropping the Airlines
The sale of stakes in Delta Air Lines Inc., Southwest Airlines Co., American Airlines Group Inc. and United Airlines Holdings Inc. continues Buffett’s tumultuous history with the industry.
He swore off the sector years ago after a troubled bet on USAir, then in 2016 he dove back in. In March, he told Yahoo Finance that he wouldn’t be selling airline stocks.
“Well, he just rejoined Airlines Anonymous,” said Bill Smead, chief investment officer of Smead Capital Management, which owns Berkshire shares.
Buffett, Berkshire’s chairman and chief executive officer, gained fame for turning a struggling textile company into a conglomerate now valued at $444 billion. But as Berkshire swelled in size, the billionaire investor struggled to supercharge its growth amid soaring valuations in the recent bull market.
That’s weighed on Berkshire’s stock price, as the Class A shares fell 19% this year through Friday, more than the 12% decline in the S&P 500 Index, and have trailed the benchmark’s returns over the past decade. Berkshire shares dropped 3.2% at 9:42 a.m.