Warren Buffett Says Markets Have Become a ‘Gambling Parlor’

After a yearslong deal drought, Mr. Buffett’s

Berkshire Hathaway Inc.

BRK.B -2.55%

is opening up the spending spigot once more. It cast an $11.6 billion deal to purchase insurer

Alleghany Corp.

Y -0.62%

, poised to be Berkshire’s greatest acquisition in six years. It purchased hundreds of thousands of shares of

HP Inc.

HPQ -2.53%

and

Occidental Petroleum Corp.

OXY -3.40%

And it dramatically ramped up its stake in

Chevron Corp.

CVX -3.16%

, making the vitality firm one in every of Berkshire’s prime 4 inventory investments.

The massive query: Why?

“It’s a playing parlor,” Mr. Buffett stated Saturday of the markets over the previous few years. He added that he blamed the monetary trade for motivating dangerous conduct amongst buyers. Whereas he finds speculative bets “obscene,” the pickup in volatility throughout the markets has had one good impact, he stated: It has allowed Berkshire to search out undervalued companies to put money into once more following a interval of relative quiet. 

“We rely on mispriced companies by means of a mechanism the place we’re not answerable for the mispricing,” Mr. Buffett stated.

Mr. Buffett, 91 years outdated, shared his ideas on the state of the markets, Berkshire’s insurance coverage enterprise and up to date investments on the firm’s annual shareholder assembly in downtown Omaha.

Berkshire additionally held votes on shareholder proposals, with buyers finally hanging down measures that requested Berkshire to make its board chairman impartial and known as for the corporate to reveal local weather danger throughout its companies. 

Shareholders keen to attain prime seats lined up for hours earlier than the doorways opened within the area the place Mr. Buffett; right-hand-man

Charlie Munger,

98; and Vice Chairmen

Greg Abel,

59, and

Ajit Jain,

70, took the stage. As Mr. Buffett entered, a lone viewers member took the chance to ship a message. “We love you,” the individual shouted. 

Mr. Buffett appeared equally enthused to see the hundreds of shareholders sitting earlier than him. 

It was lots higher having the ability to be with everybody in individual, he stated.

Up till just lately, Berkshire had largely been sitting on its money pile. Its enterprise thrived; a recovering economic system and roaring inventory market helped push web earnings to a report in 2021. Nevertheless it didn’t announce any main offers, one thing that led many analysts and buyers to marvel about its subsequent strikes. Berkshire ended the yr with a close to report amount of money available. (After Berkshire’s shopping for spree, the dimensions of the corporate’s struggle chest shrank to $106.26 billion on the finish of the primary quarter, from $146.72 billion three months earlier.)

Mr. Buffett’s feeling that there have been no interesting funding alternatives for Berkshire shortly gave technique to pleasure in late February, he stated Saturday, when he received a duplicate of Alleghany Chief Govt

Joseph Brandon’s

annual report.

The report piqued his curiosity. He determined to observe up with Mr. Brandon, flying to New York Metropolis to speak a few potential deal over dinner. 

If the chief govt hadn’t reached out, “it wouldn’t have occurred to me to put in writing to him and say, ‘Let’s get collectively,’” Mr. Buffett stated.

Berkshire’s determination to construct up a 14% stake in Occidental additionally happened with a report. Mr. Buffett stated he had learn an analyst word on the corporate, whose inventory remains to be buying and selling under its 2011 excessive, and determined the casino-like market situations made it time to purchase the inventory.

Over the course of simply two weeks, Berkshire scooped up hundreds of thousands of shares of the corporate. 

“I don’t assume we ever had something fairly like we’ve got now when it comes to the volumes of pure playing exercise occurring every day,” Mr. Munger stated. “It’s not fairly.” 

However the quantity of hypothesis within the markets has given Berkshire an opportunity to identify undervalued companies, Mr. Munger stated, permitting the corporate to place its $106 billion money reserve to work.

“I feel we’ve made extra due to the loopy playing,” Mr. Munger stated.

One other enterprise that caught Berkshire’s eye? Chevron. Berkshire’s stake within the firm was value $25.9 billion as of March 31, up from $4.5 billion on the finish of 2021, in accordance with the corporate’s submitting. That makes Chevron one in every of Berkshire’s 4 greatest stockholdings, alongside

Apple,

American Categorical Co. and Financial institution of America Corp.

Neither Mr. Buffett nor Mr. Munger particularly addressed Berkshire’s determination to extend its Chevron stake.

However the two males provided a protection of the oil trade. It’s a good factor for the U.S. to be producing extra of its personal oil, Mr. Buffett stated. Mr. Munger went additional, saying he might hardly consider a extra helpful trade. 

On the assembly, Mr. Buffett additionally revealed that Berkshire has elevated its stake in

Activision Blizzard Inc.

The corporate now holds a 9.5% place in Activision, a merger-arbitrage wager from which Berkshire stands to revenue if

Microsoft Corp.’s

proposal to accumulate the videogame maker goes by means of.

On the finish of the day, Berkshire doesn’t attempt to make its investments based mostly on what it believes the inventory market will do when it opens every Monday, Mr. Buffett stated.

“I can’t predict what [a] inventory will do…We don’t know what the economic system will do,” he stated.

What Berkshire focuses on is doing what it could to maintain producing returns for its shareholders, Mr. Buffett stated. Berkshire produced 20% compounded annualized features between 1965 and 2020, in contrast with the S&P 500, which returned 10% together with dividends over the identical interval.

“The thought of dropping completely different folks’s cash…that’s only a future I don’t wish to have,” Mr. Buffett stated.

Write to Akane Otani at akane.otani@wsj.com