22 Apr

Did Buffett Deploy Cash in Q1 as Markets Bounced Back?

WRITTEN BY Mohit Oberoi, CFA

US markets in the first quarter

US markets had a strong first quarter, with the S&P 500 (SPY) rising 13.1%. The markets slumped in the fourth quarter amid concerns about slowing economic growth. Apple (AAPL), which was Berkshire Hathaway’s (BRK-B) biggest holding at the end of the fourth quarter, slumped more than 30%.

Meanwhile, despite the market sell-off, Berkshire’s buying activity was quite subdued in the fourth quarter. Warren Buffett hinted that since the company was looking at a major acquisition (which apparently did not materialize) in the fourth quarter, its activity in publicly traded securities took a back seat. However, Berkshire bought a small stake in Red Hat (IBM) and exited Oracle (ORCL) in the quarter.

Did Buffett Deploy Cash in Q1 as Markets Bounced Back?

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Annual letter

In his 2018 annual letter, Buffett said that the company was looking at a major acquisition that would help it deploy its massive cash pile. However, Buffett also added that the company might buy more publicly traded securities this year. He said, “My expectation of more stock purchases is not a market call. Charlie and I have no idea as to how stocks will behave next week or next year. Predictions of that sort have never been a part of our activities. Our thinking, rather, is focused on calculating whether a portion of an attractive business is worth more than its market price.”

13F

Whether or not Berkshire added to its portfolio of publicly traded securities will be revealed when the company files its first-quarter 13F. What we do know is that the company added more Delta Airlines (DAL) shares in the first quarter. Incidentally, Berkshire was rumored to be buying Southwest Airlines (LUV) earlier this year. Berkshire also holds stakes in American Airlines (AAL) and United Continental (UAL).

Buffett’s views on the airline sector have changed over the last few years. Read How Warren Buffett’s Investment Philosophy Has Evolved for more analysis.

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