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Warren Buffett Lost $50 Billion In First Quarter And Dumps ALL Airline Stocks (#GotBitcoin?)

Warren Buffett’s company reported a nearly $50 billion loss on Saturday because of a huge drop in the paper value of its investments, although the company is still sitting on an enormous pile of cash. Warren Buffett Lost $50 Billion In First Quarter And Dumps ALL Airline Stocks (#GotBitcoin?)

It is the latest sign the economic toll the novel coronavirus is having on corporate America.

Berkshire Hathaway Inc. said it lost $49.7 billion, or $30,653 per class A share, during the first three months of this year. (Berkshire Hathaway has two classes of shares, of which the Class A shares are the more expensive and main shares.) That’s down from last year’s first quarter profit of $21.66 billion, or $13,209 per share. Berkshire’s shares closed at $273,262 on Friday.

The biggest factor in the loss was a $54.5 billion tumble on the value of Berkshire’s investment portfolio as the stock market declined sharply after the coronavirus outbreak began. The year earlier, Berkshire’s investments added $15.5 billion to the company’s profits.

Warren Buffett Lost $50 Billion In First Quarter And Dumps ALL Airline Stocks (#GotBitcoin?)

Buffett has long said Berkshire’s operating earnings offer a better view of his conglomerate’s quarterly performance because they exclude investments and derivatives, which can vary widely. By that measure, Berkshire’s operating earnings improved to $5.87 billion, or $3,617.62 per share, from $5.56 billion, or $3,387.56 per share. for the quarter.

Still, analysts surveyed by FactSet had expected better — operating earnings per share of $3,796.90 on average.

Berkshire’s revenue grew 1% to $61.27 billion. The company is also sitting on more than $137 billion in cash because Buffett, a famous Wall Street bargain hunter, has struggled to find major acquisitions for the company recently when the values of stocks were at all-time highs.

On Saturday afternoon, Buffett plans to lead an abbreviated “virtual” version of Berkshire’s annual meeting online, without any of the 40,000 shareholders who typically attend the festive event. The company shifted to an online meeting and cancelled all the usual hoopla surrounding the event because of the coronavirus outbreak. He is expected to answer selected shareholder questions screened by several journalists.

Berkshire owns more than 90 companies, including the BNSF railroad and insurance, utility, furniture and jewelry businesses. The company also has major investments in such companies as Apple, American Express, Coca-Cola and Bank of America.

Warren Buffett Dumps Us Airline Stocks, Saying ‘World Has Changed’ After Covid-19

Warren Buffett Lost $50 Billion In First Quarter And Dumps ALL Airline Stocks (#GotBitcoin?)

The legendary investor indicates that financial markets could still have further to fall as worldwide cases edge towards 3.5m.

Warren Buffett, the legendary American investor, has sold his firm’s entire holdings in the four major US airlines, warning that the “world has changed” for the aviation industry because of the coronavirus crisis.

In comments that will send shockwaves through financial markets already pulverised by the economic shock of the outbreak, Buffett said the outbreak could have an “extraordinarily wide” range of possible outcomes.

Shares around the world are poised for another torrid week as worldwide cases of the virus creep towards 3.5 million and deaths near 250,000. Despite massive central bank and government intervention, stock markets have been rocked by the continued spread of Covid-19, the plunge in oil prices and Donald Trump’s threats to reignite his trade war with China.

Buffett, 89, who has become known as the Sage of Omaha for his investment skill over the decades, indicated that he believed stock markets had not reached the bottom of the current dip.

Speaking at the virtual annual meeting of his company Berkshire Hathaway from Omaha, Nebraska, Buffett said he had not provided financial support to companies as he did buying Goldman Sachs shares during the 2008 financial crisis because he saw nothing “attractive” enough, even after the recent plunge in the markets.

The outlook appears particularly bleak for the airline industry, which has been hit by the shutdown of most of its traffic, forcing mass layoffs and even bankruptcies. FlyBe in the UK went into administration in the early days of the crisis and Virgin Atlantic has asked the government for a bailout. British Airways has announced mass redundancies, as has Ryanair. Virgin Australia has collapsed.

Berkshire Hathaway had held sizeable positions in the major US airlines, including an 11% stake in Delta Air Lines, 10% of American Airlines, 10% of Southwest Airlines and 9% of United Airlines at the end of 2019, according to its annual report and company filings.

But with thousands of planes parked on tarmac across the world and no clear timetable for the resumption of air travel, Buffett said he had sold his stocks as the airline industry’s outlook rapidly changed.

“We made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss,” Buffett said. “We will not fund a company … where we think that it is going to chew up money in the future.”

Southwest, American and United declined to comment, but Delta said in a statement it was aware of the sale and had “tremendous respect for Mr Buffett and the Berkshire team”. The airline added it remained “confident that the strengths that are core to Delta’s business – our people, our brand, our network and our operational reliability – will endure and position Delta to succeed”.

There was some hope for the travel industry from China on Sunday, where internal travel saw a large increase on 1 May, the first day of a long holiday weekend. The jump in travel was led by Wuhan, epicentre of the coronavirus epidemic that struck the country late last year.

The number of people travelling outside their home cities leapt nearly 50% at the start of the Labour day weekend, compared with the first day of a holiday on 4 April, according to Reuters calculations on data from China’s internet giant Baidu.

China reported two only new coronavirus cases for 2 May, up from one the day before, data from the country’s national health authority showed on Sunday.

The numbers contrasted with the rapid spread of the disease in other countries such as Brazil where there were 4,970 new cases of the virus and 421 deaths in the 24 hours to Saturday. The nation has now registered 95,559 confirmed cases of the virus and 6,750 deaths. New cases increased roughly 5.4% on Saturday from the previous day, while deaths rose by roughly 6.7%.

Updated: 5-4-2020

Even Warren Buffett Wonders If People Will Return To Offices

Berkshire Hathaway CEO discusses the future of work, the prospects of layoffs at his company and how to better support front-line workers.

Count Warren Buffett among those questioning the future of offices.

The 89-year-old chairman and chief executive of Berkshire Hathaway Inc., BRK.B -2.58% who has spent years railing against corporate bloat, said on Saturday that the coronavirus pandemic could lead to longer-term shifts in the way people do their jobs. With offices closed and cities sheltering in place, millions of people have spent the past few weeks working remotely.

“The supply and demand for office space may change significantly,” Mr. Buffett said. “A lot of people have learned that they can work at home, or that there’s other methods of conducting their business than they might have thought from what they were doing a couple of years ago. When change happens in the world, you adjust to it.”

Like many Americans, Mr. Buffett said it had been more than seven weeks since he had put on a tie. “It’s just a question of which sweatsuit I wear,” he joked.

The comments came on Saturday during Berkshire’s annual meeting in Omaha, Neb., a more than four-hour affair followed by investors world-wide. Typically, thousands of shareholders attend the event in person to hear Mr. Buffett and his longtime business partner, Charlie Munger, muse about the state of the company and the world. This year’s event was streamed from an empty arena. Mr. Munger wasn’t present and Mr. Buffett answered questions submitted by shareholders via email.

Mr. Buffett spent much of his time making a bullish case for the long-term health of the American economy, doing so at times in a format he has long shunned: a slide presentation. He also touched on the future of jobs at his company, his opinion of the Paycheck Protection Program meant to aid small businesses and how the nation should be treating front-line workers.

Berkshire Outlook: Layoffs Possible

Berkshire, a conglomerate that includes the insurance company Geico, railroads, energy companies and brands such as Dairy Queen and See’s Candies, employs about 391,500 people.

Even though Berkshire held about $137.3 billion in cash at the end of the first quarter, Mr. Buffett said it is possible the company may need to lay off some workers in the short term.

At Berkshire, the company’s manufacturing businesses could see a steep drop in demand, Mr. Buffett said. “In those cases, we would have layoffs at some point,” he said. Still, over the long term, he said he expected the company to keep hiring.

“Five years from now, I think Berkshire will be employing considerably more people,” Mr. Buffett said.

The PPP: ‘Hell to Administer’

While none of Berkshire Hathaway’s fully owned subsidiaries has applied for government stimulus or assistance under a loan program for small businesses, Mr. Buffett praised the efforts.

The Paycheck Protection Program, which gives loans to businesses with 500 or fewer employees that can be forgiven if they don’t lay off workers, was a “very good idea,” he said.

The program has drawn intense criticism from small businesses frustrated in their attempts to receive loans, and some public companies that secured the money have returned it after blowback. Mr. Buffett said he credited Congress and other public officials for acting swiftly.

“It must be hell to administer,” he said. “It just isn’t that easy to inaugurate incredibly large [programs]. There’s going to be a certain amount of fraud. Everything doesn’t go perfectly. But I’m 100% for taking care of the people that really get hurt by something that they had nothing to do with.”

‘We Don’t Even Know Their Names’

Asked how the country could better support health care workers, delivery drivers and food-service employees on the front lines, Mr. Buffett suggested they deserved higher wages and more respect.

“They’re working 24 hours a day, and we don’t even know their names,” he said. “We ought to do things that help those people.”

An ideal economy should allow low-wage workers to raise a family on income from a single 40-hour-a-week job, Mr. Buffett said. Many front-line workers must maintain multiple jobs, and employees at meat plants and warehouses have taken to walking out of their companies in recent weeks to protest working conditions.

“They’re contributing a whole lot more than some of the people that came out of the right womb or got lucky and know how to arbitrage bonds or whatever it might be,” he said. “You would think with our prosperity, we would hold ourselves to even higher standards of taking care of our fellow man—particularly when you see a situation like you’ve got today.”

Though living conditions had improved for those earning the lowest 20% in wages over the past 100 years, “it’s really improved for the top 1%,” Mr. Buffett said.

Updated: 5-16-2020

Warren Buffett’s Berkshire Hathaway Dumps Goldman Sachs Holdings

Berkshire plowed $5 billion into the bank in 2008, marking a significant vote of confidence in the future of Wall Street banks.

Warren Buffett’s Berkshire Hathaway Inc. slashed the bulk of its holdings in Goldman Sachs Group Inc. during the first quarter, the conglomerate said Friday in a securities filing.

The sale reflects a coda of sorts to an investment born of the financial crisis, when Berkshire in 2008 plowed $5 billion into the bank to help secure its future during a period of existential uncertainty on Wall Street. Berkshire and Goldman redrew the terms of the deal five years later.

The bet at the time marked a significant vote of confidence in the future of Wall Street banks, coming shortly after Lehman Brothers Holdings Inc. filed for bankruptcy.

Berkshire, once one of Goldman’s largest shareholders, said it sold more than 10 million Goldman shares in the first quarter, bringing its holdings to 1.9 million shares. Its stake in the bank, now less than 0.6%, was worth $330 million as of Friday. Goldman’s share price fell 33% in the first quarter as banks suffered with the coronavirus pandemic slamming the brakes on the global economy.

Berkshire earlier this month swung to a first-quarter loss as the selloff in markets hit the company’s vast investments, though the company’s operating earnings rose in the quarter. Mr. Buffett has been a huge backer of U.S. financial services firms in recent years, building up a position in banks, payments companies, insurers and ratings firms. Toward the latter half of last year, these holdings represented about a fifth of Berkshire’s market capitalization.

Updated: 7-2-2020

U.S. Treasury Reaches Loan Agreements With Five Major Airlines

American, Frontier, Spirit Airlines, Hawaiian Airlines, SkyWest will receive loans under coronavirus stimulus.

The U.S. Treasury Department has agreed to terms for loans to American Airlines Group Inc. and four smaller airlines as part of an aid program to help the industry weather the coronavirus pandemic.

The Treasury said that in addition to American, Frontier Airlines, Hawaiian Airlines, SkyWest Airlines and Spirit Airlines Inc. had agreed to loan terms and signed letters of intent.

Air travel fell sharply this spring as government restrictions on travel and fears of infection kept passengers from flying. While air travel has started to rise, demand remains a fraction of what it was a year ago and airline executives have said they expect a full recovery will likely take years.

These are the first airlines to accept government loans from a $25 billion pool Congress earmarked under the Cares Act, the $2.2 trillion economic stimulus package passed in March.

Major carriers have also received another $25 billion in federal aid to pay workers through the end of September to avoid mass layoffs they said would have been inevitable otherwise. The payroll funds are largely made up of grants that don’t need to be paid back.

American expects to complete the $4.75 billion loan in the third quarter, Chief Executive Doug Parker and President Robert Isom wrote in a letter to employees Thursday. The airline has previously said it was seeking to pledge its frequent-flier program as collateral.

Even with the infusion of government funds, airlines face a dire outlook. American is burning through $35 million in cash per day, Mr. Parker and Mr. Isom wrote, and likely has more than 20,000 more employees than it needs to operate the shrunken schedule it anticipates this fall.

“To be clear, this doesn’t mean 20,000 of our team members will be furloughed in October, it simply means we still have work to do to right-size our team for the airline we will operate,” the executives wrote.

Airlines have been scrambling to raise as much cash as they can as travel bookings have fallen sharply, and American executives have said that the government loans were likely the most efficient form of financing available. The airline last week raised another $4.5 billion to bolster liquidity, including $2.5 billion in senior notes at an interest rate of 11.75%.

Other carriers such as Delta Air Lines Inc., United Airlines Holdings Inc. and Southwest Airlines Co. have previously said they have applied for government loans but hadn’t decided whether to tap them. Airlines have through the end of September to draw the funds.

The Treasury didn’t detail the amounts of the loans or the terms, but said the borrowers would have to provide warrants, equity stakes, or senior debt instruments. The Treasury said it is continuing discussions with other carriers that are eligible for loans.

Hawaiian Airlines has previously said it would be eligible for $364 million in government loans.

Spirit has said it would be eligible for $741 million, and SkyWest has said it would be eligible for $497 million. A spokeswoman for Frontier Airlines declined to comment.

Updated: 1-25-2021

Warren Buffett’s Investments In Japan Struggle To Keep Up With The Market

Holdings in fossil-fuel businesses pressure companies that Berkshire Hathaway took 5% stake in.

The chief executive of Japan’s Sumitomo Corp. SSUMY 1.61% was scrolling through emails on his iPhone late one night when he noticed one from Warren Buffett’s company. Masayuki Hyodo thought it looked like an ad, but he opened it just in case, then tapped on the PDF attachment.

Before Mr. Hyodo’s eyes was a personal letter signed by the American investing legend. Mr. Buffett wrote that his company, Berkshire Hathaway Inc., BRK.B 0.09% was about to announce that it had acquired 5% of Sumitomo’s shares, part of its biggest investment in Japan.

“It was totally unexpected,” Mr. Hyodo said of the late-August disclosure. “He is such a distinguished investor, so it’s an honor.”

Mr. Buffett spent about $6 billion taking 5% stakes in five Japanese investment companies including Sumitomo, whose roots date back 430 years.

What has become clear since the investments is that the 90-year-old Mr. Buffett and Sumitomo have something in common beyond a venerable history. Both are out of fashion with investors these days.

Sumitomo and its peers, known at home as general trading companies, tend to have portfolios weighted toward unglamorous fields such as energy, mining and infrastructure. Some of those investments are seen as endangered by the rapid spread of renewable energy.

Since the trading day before the Buffett investments were announced, all five Japanese companies have underperformed the broader market. Sumitomo’s shares are up 14% compared with a 26% rise in the Nikkei Stock Average. Berkshire, meanwhile, has risen about 3% since the beginning of 2020 compared with 19% for the S&P 500 index.

A representative for Mr. Buffett didn’t return messages seeking comment.

Sumitomo has said it expects to lose the equivalent of more than $1.4 billion in the year ending in March because of one-time write-downs. On Monday, it said write-downs on its nickel-mining business in Madagascar would top $800 million, owing to a pandemic-related operation stoppage and a weaker outlook for nickel prices.

Many investors find the Japanese companies difficult to understand because they have stakes in so many fields. Investors focusing on Japan have been putting their money into more focused plays such as Nintendo Co. , the videogame maker raking in profit during the pandemic.

“We certainly do find ourselves in a zone where people don’t know what we do, but we have to shoulder our responsibility to explain,” said Sumitomo’s Mr. Hyodo.

In his telling, what the company does is dig deep roots in the countries where it does business and not worry too much about making money quickly. “My apologies to the shareholders, but we’re not doing business just for dividends or shareholder profit,” he said. “Our core thinking is to build businesses that will bring broad and long-lasting profits to society.”

Mr. Hyodo recalls with pride an early job in his career helping build a gas-fired power plant in Jordan that recently reached 30 years in operation. Later he made his reputation running Sumitomo’s investment in a giant coal-fired power plant in Indonesia, where he lived for two years.

Little by little, Sumitomo is rebalancing its portfolio with renewable-energy projects. On Friday, it said it would lead a project in Australia to use solar power to produce hydrogen, seen as a future green fuel for cars and power plants. Thinking long-term, Mr. Hyodo says, is the key to navigating through a pandemic and green-energy revolution.

Rakuten Securities strategist Masayuki Kubota said investors tended to have an outdated perception of Japanese investing companies as fossil-fuel-centered. In fact, retail is a big business for several of them, including Sumitomo, which has a cable-television business and a supermarket chain in Japan. And even some of the traditional-looking projects may have value in the economy of the 2020s. The nickel from Madagascar, to name one, is useful for electric-vehicle batteries.

Itochu Corp. , which enjoys the highest market value of the five companies Buffett invested in at nearly $50 billion, said Jan. 13 that it would divest all of its holdings in coal-mining assets.

CLSA strategist Nicholas Smith said the flexibility of the Japanese companies to shift to new businesses gave them an edge over other cheaply valued stocks tied to a single declining industry.

The companies are known for their dedicated career employees who scour the globe for deals, many with specialized knowledge of a particular mineral or foodstuff.

“There are one-man armies of information in these companies. That’s what Buffett was after,” Mr. Smith said.

Mr. Buffett’s statement in August about his Japanese stock buys ended by saying, “I hope that in the future there may be opportunities of mutual benefit.”

Mr. Hyodo hopes so, too. He said a Sumitomo executive and one of Mr. Buffett’s lieutenants, whom he didn’t name, have begun discussions to get to know each other better.

Mr. Buffett gave the company an opportunity to work harder, Mr. Hyodo said. “You could say we don’t have the growth potential to get 100 times bigger like a Tesla or a Microsoft or a Google,” he said, but “We’re extremely stress-resistant.”

Updated: 5-2-2021

Warren Buffett Faces Impatient Investors As Berkshire Hathaway Returns Decline

Institutional shareholders are pressing for change on climate and governance at the Omaha, Neb., conglomerate.

Professional money managers are turning up the heat on Warren Buffett’s Berkshire Hathaway Inc.

California Public Employees’ Retirement System and Neuberger Berman have demanded that the Omaha, Neb., conglomerate bring in new directors and provide more disclosures on climate risks and executive pay.

Leading up to Berkshire’s annual meeting on Saturday, proxy advisers Glass Lewis & Co. and Institutional Shareholder Services Inc. have recommended that investors withhold their votes for board members.

While many of the complaints aren’t new and none of the shareholder proposals are likely to pass, Berkshire’s lackluster returns in recent years have made it more vulnerable to criticism amid a growing wave of investor interest in corporate sustainability issues.

The shareholder movement to press companies on climate change, social progress and governance continues to gain steam in the U.S., emerging as a key selling point for money managers in their efforts to keep client money.

Under Mr. Buffett’s leadership, the firm boasts 20% compounded annualized gains from 1965 to 2020, outperforming the S&P 500’s 10.2% gains including dividends during the period. Berkshire’s total returns over the past three- and five-year periods were 12% and 14%, respectively, compared with the index’s 19% and 18%.

“Berkshire has gotten a pass in part because of its historically strong financial performance,” said Simiso Nzima, head of corporate governance at Calpers.

Berkshire has continued to stress its continued focus on the long game. Mr. Buffett, who is chief executive and chairman of the company, built up a diverse portfolio of mostly U.S. businesses and investments meant to perform over decades, not to compete with a volatile market buoyed by booming tech stocks.

Calpers, the nation’s largest public-pension fund with $444 billion in assets, co-sponsored a shareholder proposal imploring Berkshire to provide more disclosures on climate-related risks and opportunities.

The pension fund is also withholding its votes to re-elect members of the board’s audit and governance committees on grounds of failing to meet shareholder demands over climate-risk disclosures. It said it was concerned that the board lacks new members, doesn’t engage with shareholders and isn’t letting investors vote on executive pay plans.

“If you don’t refresh the board, you don’t have a next generation of directors able to learn from the long-serving directors before they leave the board,” Mr. Nzima said.

Berkshire declined to comment ahead of the company’s Saturday meeting.

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