Warren Buffett’s Covid prediction: No early relief for Berkshire Hathaway; these businesses already shut

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Updated: May 03, 2020 1:07 PM

Warren Buffet told shareholders that Berkshire Hathaway has sold around $6.5 billion of stock in April when it pared around 10 per cent stakes in the country’s four largest airlines – American, United, Delta and Southwest Airlines.

Warren Buffett predict the future of the America's economy amid the struggle against coronavirus and lockdown: Nothing can basically stop AmericaNebraska Furniture Mart and See’s Candies have been shut to contain Covid spread. Image: Reuters

The March-quarter operating earnings for Warren Buffett’s Berkshire Hathaway, which reported a 6 per cent increase to $5.87 billion, “have little meaning for forecasting the next year,” Buffet said at the company’s annual shareholders meeting on Saturday. Hathaway reported $49.7 billion loss in the first quarter of 2020 amid Covid-19 outbreak. “I don’t know the consequences of shutting down the U.S. economy…For some period, certainly during the balance of the year but maybe much longer…our operating earnings will be considerably less than if the virus hadn’t come along,” said Buffet.

While the Berkshire Hathaway’s three biggest ventures including the BNFS railroad, insurance, and the energy business have been in a “reasonably decent” situation but its other businesses (such as the home furnishing store chain Nebraska Furniture Mart and chocolate and candy maker See’s Candies) have been “effectively shut down,” he said, to contain the virus spread.

Also read: Warren Buffett reveals why he hasn’t made any big investment despite sitting on $137 billion cash pile

As the company accelerated efforts against Covid in the second half of March and April, “most of our businesses were negatively affected, with the effects to date ranging from relatively minor to severe,” Hathaway said in its Q1 2020 earnings report. Its railroad, utilities and energy, insurance and certain of its manufacturing, distribution and service businesses “have slowed considerably in April.” Buffett told his shareholders that the company has sold around $6.5 billion of stock in April when it pared around 10 per cent stakes in the country’s four largest airlines – America, United, Delta and Southwest Airlines. The billion investor said he made an “understandable mistake” in valuing their stock noting that the airline sector has been “really hurt by a forced shutdown” due to the virus.

Berkshire Hathaway, which reported $137 billion cash in hand, hasn’t made any big investment deal since 2016 when it bought the industrial goods and metal fabrication company Precision Castparts for $37 billion. Buffett said that’s because he hasn’t come across a company “attractive” enough for the deal. “We have not done anything, because we don’t see anything that attractive to do.” However, the company is “willing to do something very big,” he said.

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