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BloombergNEW YORK (Bloomberg) – The most famous value investor in the world does not see much value in stocks at record levels.
Berkshire Hathaway Inc. of Warren Buffett has sold for $ 1 billion more stock than last quarter, its biggest net sell since late 2017. Buffett had been an active stock buyer every quarter of the year. last year, including nearly $ 13 billion in the third quarter. only.
Buffett did not make a major acquisition for several years and even gave up one of its new ways of deploying cash, which slowed down the purchase of Berkshire's own shares in the second quarter. As a result, the company's cash – a major goal for investors in recent years – has reached a record $ 122 billion.
"It would be difficult to look at the cash balance and their uses over the last few quarters and not be disappointed at not buying any company, buying a lot of stocks, or buying a lot of stocks. Jim Shanahan, an badyst at Edward Jones, said in a telephone interview Saturday.
The growing volume of cash reflects the strength of Buffett's operating activities under one roof and provides the investor with sufficient leeway to act quickly when large transactions are completed. But Buffett has acknowledged that having more than $ 100 billion in return for a few years is a drag on the growth of the company.
Buffett, 88, has earned his legendary status by systematically outperforming the overall market, but Berkshire's total return has been below that of the S & P 500 over the past five, 10 and 15 years. This raises the question of whether Berkshire has become too big to generate excess returns and whether the money would be better paid to shareholders than leaving it to his eventual successor to pursue a major operation.
Buffett tried to overcome these concerns by devoting his last annual meetings and letters to shareholders, touting the value of keeping Berkshire together as a conglomerate and maintaining the company's status as the first call for unique opportunities.
Part of the pile of cash should soon be put to work. Berkshire has agreed to inject $ 10 billion of preferred shares into Occidental Petroleum Corp. to help finance the acquisition of Anadarko Petroleum Corp., a transaction that will be finalized if Anadarko shareholders approve the merger later this month.
Last year, Buffett said that transaction prices were too high for him. He decided to build a huge stake in Apple Inc., spending more than $ 15 billion in shares of the technology giant. He has also focused on banks and airlines, but holdings in many of these companies are now close to the 10% ownership threshold, which he says he prefers not to cross.
Berkshire's $ 400 million redemptions during the quarter are down from $ 1.7 billion in the first three months of the year. This total is less than the $ 1.5 billion expected by badysts at Barclays PLC. Berkshire's board of directors changed its buy-out policy last year, providing another way to deploy the mbadive cash flow, but Buffett limited redemptions, buying back only $ 3.4 billion dollars since the policy change. JPMorgan Chase & Co., the closest financial company to Berkshire in terms of market value, bought back approximately $ 20 billion during this period.
The stock market rally limits Buffett's opportunities, but Buffett has pushed its equity portfolio above $ 200 billion and generated higher earnings. New accounting rules result in the inclusion of unrealized gains in earnings. As a result, the company's $ 7.9 billion capital gain allowed its net profit to rise by 17%.
Higher markets offer other tangible benefits to the company, in addition to the gains realized on its stock portfolio. In the first half of 2019, Berkshire had made gains of nearly a billion dollars on put options that he had written on several stock indexes over a decade ago, of which nearly half expire this year.
Nevertheless, investors do not reward Berkshire for its paid equity bets. While the S & P 500 jumped 17% this year, Berkshire Clbad A shares remained unchanged.
Berkshire's operating profit fell 11 percent to $ 6.14 billion in the second quarter, while Berkshire's underwriting result fell nearly 63 percent to $ 353 million. Car insurer Geico reported higher losses and expenses, due in part to advertising and salary costs. The life and health insurance of the Berkshire reinsurance group of the same name changed the contract with a major US reinsurer, which reduced the premiums earned.
The Buffett railway recorded profit gains in the quarter fueled by industrial shipments. This could help dispel concerns about its ability to withstand the slowdown in the sector.
Kraft Heinz Co. was again absent from the Berkshire results. Kraft Heinz, who is due to report the results on Aug. 8, installed a new general manager and finally released his 10-K deferred deposit in June, while the company was striving to save $ 15.4 billion of dollars. The June restatements caused a $ 34 million loss for Berkshire, announced Saturday.Speech
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