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Warren Buffett is back at the stock market buffet. Dairy Queen, after all, only offers so much sustenance.
After complaining for years that the stock market offered few high-returning assets in a sea of overvaluation, the Berkshire Hathaway CEO used this weekend to announce that his investment firm has spent $51 billion on stocks in the first three months of 2021. It seems Buffett has finally found a few deals worthy of a Dilly Bar.
Warren Walks into a Gambling Parlor...
Buffett's biggest enemies in recent years have been private equity firms and a booming stock market, both of which have made private acquisitions and stock purchases equally off-putting to the value-conscious Oracle of Omaha. At his company's annual general meeting this past Saturday, Buffett had habitually heavy words for Wall Street, which he accused of turning the stock market into a "gambling parlor", and companies into "poker chips."
He also mentioned how lucrative this casino has been for Berkshire. With the S&P 500 booking the worst start to a year since 1939, and the Nasdaq posting the worst such start in its history, many of the frenetic retail traders who date their stock market debut to last year are in the red. There's blood in the water. Buffet says, "Berkshire gets a chance to do something" and places two major bets:
- First up, oil. Berkshire sharply boosted its stake in Chevron. Now at $25.9 billion, it's one of the five biggest holdings in Berkshire's $390 billion portfolio. Factoring in a $10 billion stake in Occidental and other investments, Berkshire has taken a $40 billion bet on the oil sector, according to Edward Jones analyst Jim Shanahan.
- Second is on the regulatory environment. Buffett revealed a 9.5%, $5.6 billion stake in video game maker Activision, now in the midst of a merger with Microsoft that many on Wall Street are betting will fail if challenged by a newly emboldened Federal Trade Commission. "If the deal goes through we make some money, and if it doesn't go through, who knows," Buffett said. Talk about treating companies like poker chips.
Piling Off: Berkshire's cash pile ended the first quarter at $106 billion, the lowest since 2018, while Buffett hasn't been this active as a stock buyer since 2008, according to Bloomberg data.
Mammon the Just: Buffett's deputy Charlie Munger, renowned for his financial trash-talking game, did not disappoint. "God is getting just," is what Munger had to say about the 88% decline in the price of Robin Hood, the popular trading app, since an August 2021 high. Last year, Munger alleged the app encouraged risky trading and wasn't up-front about fees. We will have to wait until Berkshire's next quarterly meeting to see what he thinks of Yuga Labs, the creator of the Bored Ape Yacht Club NFTs, that raised $320 million worth of cryptocurrency this weekend by selling virtual real estate.