Berkshire said most of its more than 90 businesses are facing “relatively minor to severe” negative effects from Covid-19
Warren Buffett on Saturday gave an upbeat assessment of the United States' ability to withstand crises, even as he acknowledged that the coronavirus pandemic could have a wide range of impacts on the economy and his investments.
Buffett opened the annual meeting of his Berkshire Hathaway Inc in Omaha, Nebraska with 1-3/4 hour of remarks in which he tried to soothe shareholders as the pandemic batters the global economy and hurts even his own conglomerate.
Illustrating his remarks with dozens of plain black-and-white slides, the 89-year-old billionaire called dealing with the pandemic "quite an experiment" that had an "extraordinarily wide" range of possible economic outcomes.
But he said Americans have persevered and prospered through such crises as the Civil War in the 1860s, the influenza pandemic a century ago and the Great Depression, and the "American tailwind" would help them do it again.
"Nothing can stop America when you get right down to it," Buffett said. "I will bet on America the rest of my life."
The meeting was held virtually for the first time without shareholders because of the pandemic and streamed by Yahoo Finance.
It began several hours after Berkshire reported a record $49.75 billion first-quarter net loss, reflecting huge unrealized losses on common stock holdings such as Bank of America Corp and Apple Inc during the market meltdown.
While quarterly operating profit rose 6%, several larger businesses including the BNSF railroad posted declines, and Berkshire said some of its more than 90 businesses are facing "severe" negative effects from Covid -19, the illness caused by the novel coronavirus.
Buffett said operating earnings will, through at least this year, be "considerably less" than they would have been had the pandemic not occurred.
Berkshire's cash stake ended the quarter at $137.3 billion, reflecting difficulty in finding good places to invest.
He also said he decided that he "made a mistake" investing in US airlines, and that this accounted for some of the net $6.1 billion of stocks that Berkshire sold in April.
Berkshire has been among the biggest shareholders in the four largest US airlines — American, Delta, Southwest and United — but Buffett said the pandemic has changed that business "in a very major way."
The meeting is devoid of the surrounding three-day weekend of dining, shopping and other celebratory events that annually draw tens of thousands of people to Omaha for what Buffett calls "Woodstock for Capitalists."
Buffett, after the initial presentation, started to answer shareholder questions at the meeting.
He was joined by Vice Chairman Greg Abel, 57, who has day-to-day oversight of Berkshire's non-insurance businesses, and is considered by many analysts and investors a top candidate to eventually succeed Buffett as chief executive officer.
Abel is standing in for longtime Vice Chairman Charlie Munger, 96, who normally joins Buffett to answer shareholder questions.
Buffett said Munger is in "fine shape" and looking forward to attending Berkshire's 2021 annual meeting.
Vice Chairman Ajit Jain, 68, who oversees Berkshire's insurance businesses and is also a possible CEO candidate, did not attend either. Abel lives closer to Omaha than Munger and Jain.
Shareholders elected former American Express Co Chief Executive Kenneth Chenault to Berkshire's board, making him the company's first African American director.
Berkshire Stock Underperforms
Berkshire's first-quarter net loss was $49.75 billion, or $30,653 per Class A share, reflecting $54.52 billion of losses on stock and other investments. Net earnings were $21.66 billion, or $13,209 per share, a year earlier.
An accounting rule requires Berkshire to report unrealized stock losses and gains with net results, causing huge swings that Buffett considers meaningless.
Quarterly operating profit, which Buffett considers a better performance measure, rose 6% to $5.87 billion, or about $3,624 per Class A share, from $5.56 billion, or about $3,388 per share.
But year-earlier results reflected a charge for investments linked to what prosecutors called a Ponzi scheme at a solar company, which Berkshire did not know about.
Operating profit at Berkshire's businesses fell 3%, with declines at BNSF, utilities and energy units, and manufacturing, service and retailing operations such as Precision Castparts, which Berkshire bought for $32.1 billion in 2016.
Geico was able to post a 28% gain in pre-tax underwriting profit because people drove less, resulting in fewer claims for crashes. Still, the insurer, like others, is offering relief on premiums to policyholders.
Vice Chairman Charlie Munger told The Wall Street Journal last month that Berkshire might close a few small businesses.
Investors have been disappointed with Berkshire. Its stock price has fallen 19% in 2020, compared with a 12% drop in the Standard & Poor's 500, despite Buffett's prediction that Berkshire would outperform in down markets.
The decline came after Berkshire's stock lagged the index by more than 20 percentage points in 2019, including dividends.
In the first quarter, many Berkshire stock investments fared worse than the S&P, including American Express, Bank of America, Wells Fargo and the four airlines.
Falling stocks also caused a $1.39 billion pre-tax loss on derivatives contracts, where Berkshire is betting stock prices will rise over the long haul.