Buffett Strikes Cautious Tone

Over the weekend legendary investor Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) reported its worst quarterly performance in the company's history as the coronavirus takes a toll on the company's investments.

Berkshire reported a $49.75 billion net loss for the first quarter compared to net earnings of $21.66 billion during the same period a year earlier. Berkshire said most of its nearly 100 businesses saw "relatively minor to severe" effects as a result of the coronavirus, with businesses deemed as essential having slowed "considerably" in April.

Buffett was quick to point out that operating profit, which he deems a better measure of Berkshire's performance, rose 6% to $5.87 billion for the quarter.

Buffett gave plenty of insight into Berkshire's quarter and his views on markets during the company's annual meeting Saturday.

With Berkshire's cash pile growing to a record $137 billion, Buffett said the reason he's been slow to deploy it is because "we don’t see anything that attractive to do."

"We are willing to do something very big. I mean you could come to me on Monday morning with something that involved $30, or $40 billion or $50 billion. And if we really like what we are seeing, we would do it," Buffett said.

Buffett said Berkshire only purchased a net $1.8 billion of stocks during the first quarter, while repurchasing just $1.7 billion of its own stock. Buffett had enough of his airline investments, selling Berkshire's entire stake in the sector which included United Airlines, American Airlines (NASDAQ:AAL), Southwest Airlines (NYSE:LUV) and Delta Air Lines (NYSE:DAL).

"The world has changed for the airlines. And I don’t know how it’s changed and I hope it corrects itself in a reasonably prompt way," Buffett said. "I think there are certain industries, and unfortunately, I think that the airline industry, among others, that are really hurt by a forced shutdown by events that are far beyond our control."

Summing up his investments in the airline sector, Buffett bluntly said "It turned out I was wrong."

Buffett appeared to pour cold water on rumors he would be interested in helping troubled airplane manufacturer Boeing (NYSE:BA). "I don’t know that three, four years from now people will fly as many passenger miles as they did last year," Buffett said. "You’ve got too many planes."

Buffett had praise for Fed Chair Jerome Powell, saying "Jay Powell in my view, and the Fed board, belong up there on that pedestal with him because they acted in the middle of March."

The 89-year-old Buffett said he and his 96-year-old vice chairman Charlie Munger are in good health. In regards to who may take over the reigns down the line, Buffett said Greg Abel, vice chairman of non-insurance operations, as well as Todd Combs and Ted Weschler, his two key investing deputies, will allocate capital at Berkshire.

Asked why he won't break up Berkshire, Buffett replied "If you were to sell Berkshire’s various subsidiaries you would incur a very significant amount of tax at the corporate level before anything was distributed to the shareholders."

While Buffett, who is arguably one of the best stock pickers in history, is struggling to find ways to deploy Berkshire's record cash pile, perhaps his one piece of advice for most investors should be seriously considered.

"In my view, for most people, the best thing is to do is owning the S&P 500 index fund."