Stock markets have been on edge lately, and it appeared that the beginning of May wouldn't necessarily slow down the declines in many major market benchmarks. The Nasdaq Composite (^IXIC -0.09%) has taken an especially hard hit, and as of 8:30 a.m. ET, futures on the Nasdaq were down another 0.5%.
Many investors had their attention focused squarely on Omaha this past weekend, as Warren Buffett hosted the Berkshire Hathaway (BRK.A -0.87%) (BRK.B -0.86%) annual shareholder meeting live and in person for the first time in three years. It took many years for Buffett to embrace high-tech Nasdaq stocks in the Berkshire portfolio, but he has found some intriguing investments there. On Saturday, Buffett mentioned video game specialist Activision Blizzard (ATVI 1.70%) and newly minted app-based brokerage company Robinhood Markets (HOOD -1.32%), and those who follow the Oracle of Omaha can probably guess which company got more positive comments at the meeting.
A rare short-term bet from Buffett?
Shares of Activision Blizzard rose more than 2% in premarket trading. The move came as Buffett disclosed that Berkshire has been taking a larger stake in the video game retailer in hopes of turning a relatively quick profit on a pending acquisition.
Microsoft (MSFT -0.79%) made an offer to buy Activision for $95 per share in January. However, investors have seemed skeptical that the deal would go through, with the stock trading nearly $20 per share below that buyout level on Friday.
That's $20 per share of clear profit if a deal goes through, and Berkshire now has a roughly 9.5% stake in Activision in the hopes the acquisition will go forward. That's up from a stake of less than 2% as of the end of 2021 prior to the bid, and it's likely that some of the purchases have come at prices higher than where the video game maker's stock currently trades.
As Buffett pointed out, merger arbitrage deals like this are risky, and he has no inside knowledge of how regulators will rule on whether to allow Microsoft to buy Activision. Nevertheless, Berkshire's moves indicate that he believes the potential upside is greater than the likely downside if the merger fails.
The Wall Street "casino"
Meanwhile, shares of Robinhood Markets were down a fraction of a percent Monday morning. Comments from Buffett about the state of the financial industry were more general in nature, but vice chair Charlie Munger was more targeted in his negative comments about the app-based broker.
Buffett has been increasingly troubled by the short-term nature of trading lately, pointing last year to Robinhood as an example of how financial institutions were encouraging people to treat investing like gambling. Over the weekend, both Buffett and Munger revisited the topic, with the Berkshire chair noting that even major companies are getting bought and sold endlessly with little thought to their fundamental business prospects.
Munger pulled no punches in his direct criticism of Robinhood. Referring to the massive declines in the app-based broker's stock since its initial public offering and criticizing its payment-for-order-flow business model, the Berkshire vice chair called what happened with Robinhood "disgusting" and seemed to celebrate the broker's difficulties.
At the same time, Buffett did note that the irrational behavior of investors helped facilitate Berkshire's purchase of more than $50 billion in stock over the first three months of 2022, much of which came in the big downturn during late February and early March. As long as Berkshire shareholders also benefit from overclocked trading activity, they might not mind the things that other people are doing with their portfolios.