Not even Warren E. Buffett was spared financially from the coronavirus, as his conglomerate, Berkshire Hathaway, reported a $49.7 billion loss in the first quarter on Saturday, reflecting the outbreak’s toll on an investment portfolio that includes big stakes in major airlines and financial firms.
The loss was Berkshire’s biggest ever and a sharp swing from a $21.7 billion profit in the same quarter a year earlier. The conglomerate’s vast array of investments exposed it — and Mr. Buffett, long considered one of the world’s top investors — to huge swaths of the battered American economy.
Its total investment loss for the quarter, without accounting for operating earnings, was $54.5 billion. By comparison, its investment gain in all of 2019 was $56.3 billion.
Berkshire said it continued to sell stock in April, totaling $6.5 billion, plowing that money primarily into supersafe Treasury bills. Later Saturday, at his annual shareholders meeting, Mr. Buffett suggested that some of those sales involved Berkshire’s reversing large stakes in airlines.
Berkshire’s investment loss tracked the overall slide in stock markets: The S&P 500 dropped 20 percent in the first quarter. (The company’s biggest holdings are also mainstays of the S&P 500: American Express, Apple, Bank of America, Coca-Cola and Wells Fargo, with those stakes amounting to nearly $125 billion.)
The loss overshadowed a 6 percent rise in Berkshire’s operating earnings, which track the performance of the company’s owned-and-operated businesses like the insurer Geico. Mr. Buffett regards that as a better measure of the company’s overall performance and has long argued that quarterly paper gains or losses on its investments “are often meaningless” in understanding its overall health.
But it is hard to ignore the damage to a portfolio that includes stakes in financial firms like Bank of America and American Express, both of which reported steep drops in earnings for the first quarter, and four of the biggest U.S. airlines. (Berkshire also disclosed that the value of its stake in Kraft Heinz on its books exceeds the market value of that holding by about 40 percent, and warned that it might have to take a write-down on the investment in the future.)
Even some of the conglomerate’s wholly owned businesses, like the Burlington Northern Santa Fe railroad and retailers like See’s Candy, were hurt by the lockdowns that have shaken the U.S. economy. Still, Geico reported a 28 percent gain for the quarter, to $984 million, while Berkshire’s overall insurance investment profits rose modestly because of increased dividend income for the company.
The first-quarter results, in which Berkshire reported having $137.3 billion in cash, were released ahead of its first-ever online-only shareholder meeting. Sometimes described as a kind of Woodstock for capitalists, the meeting is usually a weekend-long Omaha extravaganza celebrating all things Buffett and Berkshire.
This year, it was a decidedly more subdued affair, reflecting the limits on mass gatherings and travel of the Covid-crisis era. Mr. Buffett’s longtime business partner, 96-year-old Charlie Munger, did not attend, staying at home in Los Angeles.
“It just didn’t seem like a good idea to have him make the trip to Omaha,” Mr. Buffett said, adding, “Charlie is in fine shape, and he’ll be back next year.”
Mr. Buffett was joined instead by Greg Abel, Berkshire’s vice chairman overseeing all of the company’s non-insurance companies, who sat at a separate desk some distance from Mr. Buffett.
Instead of facing thousands of adoring and affluent shareholders, Mr. Buffett, noting that he hadn’t had a haircut in seven weeks, held forth in an almost completely vacant Omaha arena that seats more than 17,000, as his comments were livestreamed.
Discussing the breakdown in the financial markets that prompted the Federal Reserve to drastically ramp up efforts to pump in fresh cash, he said, “We came very close to having a total freeze of credit.”
Previously, Berkshire had bought roughly 10 percent of the four largest U.S. airlines, but “I just decided that I’d made a mistake,” Mr. Buffett said. Referring to the pandemic’s impact on travel, he added, “The airline business — and I may be wrong, and I hope I’m wrong — but I think it, it changed in a very major way.”