May 24, 2024

Warren Buffett’s Berkshire Hathaway reported strong first-quarter earnings as the conglomerate kicked off its annual shareholder conference.

Omaha, Nebraska-based Berkshire added $21 billion in cash and Treasuries to its pile, bringing it to a record $189 billion last quarter — a 13% increase in just three months. Berkshire’s operating profit surged 39% to $11.22 billion from a year ago, thanks to a 185% year-over-year increase in insurance underwriting earnings — from $911 million to $2.6 billion. During Saturday morning’s question-and-answer session for shareholders, Buffett said the insurance business is the “most important business at Berkshire.”

In the same quarter, Berkshire offloaded a net $17 billion worth of stocks and bought back $2.6 billion worth of its own stock, up from $2.2 billion in the prior quarter.

The highly anticipated and closely watch annual conference, dubbed “Woodstock for Capitalists” by its fans, kicked off Friday in Buffett’s hometown of Omaha, Nebraska. Shareholders wait all year for a chance to hear directly from the 93-year-old Buffett, known as the Oracle of Omaha. He was joined on the panel by vice chairs Ajit Jain and Greg Abel, in the first conference without Buffett’s right-hand business partner and friend, Charlie Munger.

Here are some of the biggest takeaways from Saturday’s marathon Q&A session.

Buffett and Berkshire keep selling Apple stock

Berkshire’s holdings in Apple were valued at $135.4 billion for first quarter of 2024, a 22% drop from $174.3 billion as of Dec. 31, 2023. It was the second consecutive quarter that the conglomerate has reduced its holdings of the iPhone maker.

Apple’s share price fell 11% in the quarter, as the tech giant endured a rough start to 2024.

But Buffett said it’s “extremely likely” that Apple remains Berkshire’s largest common stock holding — and that it will stay its largest holding unless something dramatic happens.

“Unless something really extraordinary happens, we will own Apple, and American Express, and Coca-Cola when Greg takes over this place,” Buffett said, referring to Abel, his handpicked successor.

Berkshire reported that its American Express stake was worth $34.5 billion last quarter, and its Coca-Cola holdings were worth $24.5 billion. Chevron and Bank of America were also in the company’s top five holdings.

Charlie Munger’s impact

Munger, who served as vice chairman of Berkshire since 1978, died in November, just weeks before his 100th birthday. He was considered Buffett’s right-hand man and most trusted advisor.

His presence was very much felt at this year’s conference. Prior to the start of the session, CNBC showed a tribute to Munger. Across several questions, Buffett reminisced on his relationship with Munger.

“In terms of managing money, there wasn’t anybody in the world to talk to for the many, many decades than Charlie,” he said.

“Charlie, in all the years we worked together, not only never once lied to me, ever, but he also didn’t even shape things so he told half-lies or quarter-lies to sort of stack the deck in the direction he wanted to go,” Buffett said.

He also said he trusts his children and his wife “totally.”

“But that doesn’t mean I ask them what stocks to buy,” he joked. Without Munger, he talks to himself about investments.

When asked what Buffett would do if he had one more day with Munger, he said they would “probably do the same thing [they] were doing the earlier days.”

“We always lived in a way where we were happy with what we were doing everyday,” he said. “We had a lot of fun doing anything, we played golf together, we played tennis together, we did everything together.”

Tesla’s autonomous vehicle claims

GEICO auto insurance became a wholly owned subsidiary of Berkshire in 1996, and has since been a significant revenue driver. In the first quarter, GEICO brought in $10.2 billion in revenues for the conglomerate.

The future of autonomous vehicles raises questions about the impact on insurance revenues. Tesla CEO Elon Musk has said self-driving cars could reduce accidents by 50% compared with human drivers.

“If accidents get reduced 50% its going to be good for society, and it’s going to be bad for insurance companies’ volume,” Buffett said. “But good for society is what we’re looking for.”

Jain, who heads Berkshire’s insurance operations, was skeptical.

“Tesla has been toying with the idea of writing insurance directly or indirectly, and so far it hasn’t really been much of a success,” Jain said. “Time will tell, but I think automation just shifts a lot of the expense from the operator to the equipment provider.”

Succession planning — and a jab at the presidential candidates?

When it comes to the leadership transition at Berkshire, Buffett has already handed over much of the daily operations to Abel and Jain, making them the point people for most managers.

“This place, if anything happened to me, it would be working extremely well the next day. I don’t get any phone calls,” Buffett said.

Abel, who serves as chairman and CEO of Berkshire Hathaway Energy and vice-chairman of non-insurance operations, is in line to succeed Buffett as CEO.

When asked about investment possibilities in India, Buffett said investors will have to wait and see how the future management team plays the game. “Fortunately, you don’t have too long to wait on that,” he joked, noting several times that he’s slowing down.

“I shouldn’t be taking on any four-year employment contracts like several people are doing in this world at an age where you can’t be quite sure where you’re going to be in four years,” he said, in an apparent jab at President Joe Biden and former President Donald Trump, who are 81 and 77, respectively, as they face each other in a 2024 rematch campaign.

The AI genie is ‘part way out of the bottle’

“I don’t know anything about AI,” Buffett quipped. He said likened the advent of artificial intelligence to his views on nuclear weapons, which he said last year are a dangerous genie that cannot be put back in the bottle.

AI “is part way out of the bottle, and it’s enormously important and it’s gonna be done by somebody,” he said. “We may wish we’d never seen that genie, or it may do wonderful things.”

He said he has had one experience that makes him “a little nervous” about AI: seeing a video of him speaking that was generated by AI.

“I do think, as someone who doesn’t understand a damn thing about about it, that it has enormous potential for good, and enormous potential for harm,” he said. “And I just don’t know how that plays out.”

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