As Berkshire Hathaway settled into a new era under CEO Greg Abel, the conglomerate sharply increased its exposure to technology and airlines during the first quarter. Berkshire more than tripled its stake in Alphabet and purchased over $2.6 billion worth of shares in Delta Air Lines after Abel formally took over as chief executive from Warren Buffett at the start of the year.
The company also exited or reduced several investments, including holdings in Visa, Mastercard, Domino's Pizza, Amazon and UnitedHealth Group. The moves came after the departure of Todd Combs late last year. Combs had been one of the two investment managers Buffett brought in to help oversee Berkshire’s portfolio.
Buffett had long avoided major technology bets, often saying he did not understand the sector well enough to identify long-term winners. He eventually broke from that approach with a massive investment in Apple after recognising the strong loyalty consumers showed toward its iPhones and computers.
However, under Abe, by the end of March, Berkshire owned nearly 58 million Alphabet shares valued at almost $17 billion. Just three months earlier, the company held 17.8 million shares worth about $5.6 billion.
Berkshire also bought nearly 40 million shares of Delta during the quarter. Buffett has had a complicated relationship with airline investments over the years, having repeatedly built and later exited positions in the sector.
Many investors have followed Berkshire’s portfolio closely over the years because they liked to copy Buffett’s moves. That may not be the case going forward, at least until Abel establishes more of a record as a stock picker. He has spent his career operating companies like Berkshire’s collection of major utilities.
The Omaha, Nebraska-based company also owns dozens of other businesses, including major insurers like Geico, BNSF railroad, huge manufacturers like Precision Castparts and an assortment of retail and service businesses that include such well-known brands as Helzberg Diamonds, See’s Candy and Dairy Queen.
During the meeting earlier this month, Buffett, now 95 and still chairman, briefly appeared at the meeting and offered a public vote of confidence in Abel. "Greg is doing everything I did and then some," Buffett told shareholders.
Buffett also used the occasion to praise Tim Cook, reminding investors how Berkshire’s original $35 billion investment in Apple had grown to roughly $185 billion before tax. But Apple-like opportunities at that scale are rare today, which is precisely why Berkshire’s cash has become such a market obsession.
Also read: What is Warren Buffett’s best investment ever? It is not a stock
Adding to the pressure, Berkshire’s stock has underperformed the S&P 500 since Buffett announced last year that he would step aside, raising expectations that Abel may eventually need to make bolder capital allocation calls.
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