Warren Buffett hosted the Berkshire Hathaway (NYSE: BRK) annual meeting this weekend.
The event – dubbed “Woodstock for Capitalists” – typically attracts 40,000 people every year. Yet this year’s meeting was hosted by Buffett in a nearly empty room with a handful of Berkshire employees.
There are several key takeaways from the annual meeting . . .
Buffett had been a big proponent of the airline stocks. In fact, Berkshire had built a major position the following stocks as of Dec. 2019:
- Delta Air Lines: $4.1 billion
- Southwest Airlines: $2.5 billion
- United Continental Airlines: $1.9 billion
- American Airlines: $1.2 billion
During the annual meeting, Buffett explained that Berkshire has sold 100% of its airline stocks.
“The world has changed for the airlines. And I don’t know how it’s changed and I hope it corrects itself in a reasonably prompt way. I don’t know that three to four years from now people will fly as many passenger miles as they did last year… you’ve got too many planes,” Buffett explained.
Airline stocks dropped 7% – 8% following Buffett’s comments.
Buffett took a cautious tone when describing the future for the U.S. economy.
Berkshire’s chairman explained that the possible outcomes “are still extraordinarily wide.” Yet despite near-term uncertainty he said . . .
“In 2008 and 2009 our economic train went off the tracks, and there were some reasons why the roadbed was weak in terms of the banks. This time we just pulled the train off the tracks and put it on a siding. And I don’t really know of any parallel — in terms of a very, very, well, the most important country in the world, most productive, huge population — in effect sidelining its economy and its workforce.
But even facing that, I would like to talk to you about the economic future of the country. Because I remain convinced, as I have – I was convinced of this in World War II, I was convinced of it during the Cuban Missile Crisis, 9/11, the Financial Crisis – that nothing can basically stop America.”
Warren Buffett thinks the Federal Reserve is doing an outstanding job navigating the crisis.
“Jay Powell in my view, and the Fed board, belong up there on that pedestal because they acted in the middle of March. They reacted in a huge way and essentially allowed what’s happened since that time to play out.”
The Fed has been the biggest single factor supporting the stock market bounce-back since late March.
Will Buffett BUY these 5G stocks for America’s comeback? Go here for urgent details.
The Berkshire Stock Buyback
The company bought back $1.7 billion of stock in a share repurchase program during the quarter. Buffett explained that Berkshire’s share price is not at a level where he wants to aggressively buy the stock.
Buffett also says there is widespread criticism of stock buybacks, saying, “It’s very politically correct to be against buybacks now.”
He’s been a proponent of buybacks as a tax-effective way to distribute operating profits to shareholders. In fact, buybacks are really no different than dividend payments to shareholders.
Not Buying Stocks Yet
Berkshire Hathaway ended 2019 with $127 billion in cash. And at the end of March the company’s cash had grown by $10 billion – and now totals $137 billion.
During the quarter, the company spent $1.8 billion buying shares of other companies.
This shows that Buffett and his investment managers were NOT aggressively buying stocks in March. Buffett may be hesitant to make big investments given the economic uncertainty.
It appears that Berkshire is keeping its powder dry during this unprecedented health and economic crisis. The company’s next quarterly report may show additional purchases of stock since April 1.
Warren Buffett has always been bullish on America over the long-term.
Following this crisis, American lawmakers could make a huge $2 trillion investment in new infrastructure. It’s possible that we’ll see private companies like Berkshire making major investments alongside the U.S. government.
Fifth-generation wireless – known as 5G – could be a major new infrastructure project.
That’s why I’m scooping up shares of these 5G stocks – before the news breaks. And my No. 1 stock for 2020 could see shares surge 562%.
Yours in Health & Wealth,