Berkshire Hathaway Update: Talking with Barron's Andrew Bary
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This is Barron's Live. Each week, we bring you live conversations from our newsrooms about what's moving the market right now. On this podcast, we take you inside those conversations, the stories, the ideas, and the stocks to watch so you can invest smarter. Now, let's dial in. Hello, everyone, and welcome to Barron's Live, our weekly webcast and podcast.

I'm Lauren Rublin, Senior Managing Editor of Barron's. Thanks for joining us today to learn more about the markets and about Berkshire Hathaway's annual meeting, including Warren Buffett's bombshell announcement that he will retire at year end as the company's CEO. Buffett, we should note, has run Berkshire for 60 years and he's 94 years young.

Barron's Deputy Editor Ben Levison and Associate Editor Andrew Barry join me today to talk about Berkshire and much more. Andrew has covered Berkshire and Buffett for, what do you say, Andrew, more than 40 years? No, almost 30 years. Almost 30. I apologize. But I cannot wait to debrief you on your trip to Omaha for the annual meeting. So welcome, Andrew and Ben, and thank you for joining Barron's Live. Thanks, Lord.

Good to be here. Andrew, I'm going to start with a look back to the annual meeting, which took place on Saturday. Then we'll look ahead to the company's future without Warren Buffett at the helm. You were there when Buffett dropped the news that he's going to be stepping down as CEO. So describe for us what happened and describe for us the reaction in the room.

Well, it was record attendance this year in Omaha, the CHI Health Arena, where Berkshire holds its annual meeting. There might have been 40,000 people present. I think many investors realized this could be one of the final annual meetings for Buffett, and they wanted to be there for history to hear what he had to say.

The meeting went kind of uneventfully for most of the first four plus hours of the meeting. And then within about 10 minutes of when it was supposed to end, Buffett said, I've got some news I'd like to make now. And that's when he essentially dropped the bombshell that he plans to retire as CEO at the end of the year. Greg Abel, the Berkshire executive who's been his designated secretary,

successor will take control. Buffett, importantly, will remain chairman of the company and still play a role, even though it's not quite sure clear exactly what that's going to be. So what was the reaction in the room when he announced this?

Well, people were stunned by it, but then he got a standing ovation from the crowd. And obviously, there's a lot of goodwill. People and investors not only love the fact that they've made so much money in Berkshire over the years, but they also there's a lot of genuine affection for the man and what he represents. It's extraordinary. Four hours into the meeting at 94 years old. What he is a phenomenon.

So I wanted to ask you about some of the other highlights of the meeting other than the big announcement and some other highlights of your weekend in Omaha. Tell us a bit.

Well, I mean, I would say that there wasn't a lot of news at the meeting in Omaha. Buffett, as expected, was critical of the tariffs that Donald Trump's imposed. He also talked about some Berkshire matters. He, for instance, said that the insurance business property in Casley, which is critical to Berkshire, had a great year last year, but that might have been the peak. He said that pricing is coming down and risks are going up.

He also was a little bit downbeat on their giant utility business where they've had some exposure to wildfires in the West. And he was asked about that, about why the valuation of Berkshire Hathaway Energy, the big utility, appears to be lower. And he was essentially defending that. And he talked about a wide range of topics, including real estate investing, which he thinks is inferior to investing in stocks and many other topics. He kind of

We talked about everything from a deal that he had done about 60 or 70 years ago involving a company that owned a lot of cocoa to the Manhattan Project. It was kind of all over the map.

It sounds very interesting, though. Did you do a lot of shopping at all of the Berkshire-owned companies? I know that's a big feature of the meeting. Yeah, I mean, shopping is a big aspect of it. The exhibit hall features a number of the notable Berkshire companies. Steve Candy is there, International Dairy Queen is there, Jazzwares is there, Rochelle.

is there and, um, Pampered Chef, Brooks Running. Yes, I did some shopping. I'm a, I'm a fan of the so-called Squishmallow dolls that is put out by Jazzwares. I mean, there's some Warren and, um, Charlie Munger, uh, dolls, which are, which are popular with me and my kids. I brought some of those home, uh,

And there was some T-shirts that I liked and other things at the pilot store. That's the truck stop operator. So I didn't buy any running shoes. I didn't buy any cookware. But, I mean, it was a record two days of shopping. I think Steve's Candy was planning to sell 24,000 pounds of

of candy. Dairy Queen was giving away about 24,000 of its Dilly bars. So, and given how flush Berkshire Hathaway shareholders there are now, given how well the stock has been doing, their wallets were open. There was a lot of spending going on and people could ship this stuff back right there on the floor. What an amazing experience. I would have made a beeline for Dairy Queen.

But that's just me. So we have a ton of listener questions about the meeting and about Berkshire. So I'm going to bring some of the questions up into the call. We had a question from a listener, Laurie, name I like, who wants to know what you think the most important takeaway was from the meeting about the U.S. and global economies.

Well, I mean, I think, you know, Trump was not, I mean, Buffett was critical of the Trump tariffs. But I don't think he really had much to say about the global economy. I mean, he tends to not focus as much on the global economy. He did, though, warn about deficits, the federal deficits, which are

He pointed out, I think the government is running about a $2 trillion deficit, taking in about $5 trillion in revenue, spending about $7 trillion. He doesn't think that's sustainable long term. That's one of his biggest concerns. And he was also downbeat about the prospects for that. He did mention that Berkshire had formed a health care venture with J.P. Morgan and Amazon a couple of years ago to try to

cut costs and try to wring efficiencies out of the healthcare system. The idea was that the brainpower of these three companies could maybe make a dent or maybe come up with some useful suggestions. They gave up on that. And Buffett said it's really an intractable problem that only the government can really deal with.

I remember that effort and I remember when it ended disappointingly. So you mentioned that Buffett and of course the board are going to be handing the reins to Greg Abel, who's a Berkshire vice chairman. He runs the company's non-insurance operations. What can you tell us about Greg Abel? What are his strengths? What should investors be looking for?

Well, Greg Abel is a very effective manager. I mean, he had headed up Berkshire Hathaway Energy, Berkshire's big utility business, before coming to the parent company in 2018 as head of the non-insurance operations. He's strange, but really is a manager. He's well regarded by many of the subsidiaries inside Berkshire Hathaway. Buffett said at the meeting that

Abel's a better manager than he is. Buffett is famously hands-off with his managers. He actually doesn't like to get into a lot of the nitty-gritty about the various companies. He'd rather sit around, read 10-Ks, read 10-Qs, make investments. But Abel is really a manager. I talked with the Brooks CEO, which is there, makes running shoes. And he was praising Abel for both his bandwidth in terms of his ability to –

I mean, oversee dozens of different companies and also the insights he provides. So we had a question from Jeffrey. How will new management maintain the investment culture and philosophy now that Warren is stepping down as CEO and Charlie Munger, his loyal vice chairman, died, I guess, last year?

Well, Munger died in 2023, late 2023 at age 99. I mean, that's an interesting question. It remains to be seen. There are a number of unanswered questions in terms of key personnel at Berkshire. Ajit Jain, the well-regarded head of the insurance operations, is 73 right now. It's unclear whether he's going to stick around much longer.

There are two investment managers, Todd Combs and Ted Wexler, who run about 10% of the equity portfolio, which now totals about $300 billion. They run about $30 billion of that. Buffett has said nothing about them at the meeting and really has said very little about them in recent years. It's unclear what their role is going to be versus ABLE. Buffett has suggested that ABLE might run the equity portfolio as well as handling the executive responsibilities.

And so it's unclear what role Todd and Ted are going to have. So there are a lot of open questions about management. I mean, as far as, as, as things look in the future, but I mean, Berkshire is, I mean, what will remain is a,

very profitable company. Berkshire is earning about $40 billion a year now after taxes based on the run rate in the first quarter. So it's sitting on about $335 billion in cash. There's plenty of wherewithal for acquisitions to buy back stock and to potentially make acquisitions. So, I mean, Buffett is leaving Greg Abel in a very good position right now. I wouldn't mind if someone left me with all that cash. So let's talk about one thing you haven't mentioned yet.

Will Berkshire pay a dividend under Abel? We have a number of questions about that from our listeners. What's your view? The thinking is that a dividend may wait until Buffett's death. I mean, Buffett is opposed to dividend. He's very adamant about that.

He feels that cash in his hands is better than cash in the hands of shareholders. Most shareholders tend to agree with that. Whenever I write that Berkshire might start paying a dividend and that it might make sense for Berkshire to distribute cash, given how much it's earning and how much cash it's sitting on, I get dozens of comments from readers who think it's a terrible idea. One of the issues is taxes.

I mean, if Berkshire were to pay a dividend, Buffett, who does not pay a lot in income taxes every year from what little he's disclosed about that, would owe a good amount of money in income taxes. People would much prefer to have a tax advantage growth in the stock price. And many people plan to give the stock away after they die or give it to their children. So it becomes more tax efficient that way. But I think ultimately,

post-Buffett, after his death, there will be a dividend. And I think that that's probably a good thing for Berkshire shareholders. All right. We will have a wait. I have a long wait before we know about that.

Let's talk about Berkshire stock. The stock sold off this morning. That's the first trading day after Buffett's announcement. The stock was down about 4% the last time I looked. And in a piece on Barron's.com this morning, you quoted Doug Cass, who's a money manager. He advised investors not to bottom fish. So what is your near-term assessment of Berkshire Hathaway stock? And what do you think investors can expect from the stock in the longer term?

Well, I mean, I think we may have seen a high watermark in the stock on Friday when it hit a record high. You know, coming into today, when we've had a 4% decline, the stock was up almost 20% this year against a 3% decline in the S&P 500. Huge outperformance so far this year. The stock's at a high valuation relative to book value, close to 1.8 times and about 25 times burning. So the stock is historically growing.

expensive right now. So it's not surprising given where the stock has been trading, given the prospect of Buffett stepping down as CEO that the stock was down today. Doug Cass, the Seabreeze, said don't chase it. I mean, don't bottom fish essentially today. Don't buy the dip. He thinks that the stock essentially could be heading lower given what he thinks is a relatively high valuation right now.

Andrew, can I ask a question? You know, that's kind of the short term, but you also mentioned that people want to give the stock to their kids. I mean, the stock has done so well for so long, but without Buffett, I mean, should they just take profits on it and move on to something else?

Well, I mean, I think people are very reluctant to take profits. I mean, most people own the stock out, I mean, in taxable accounts. It'd be very big, heavy taxes to pay. I mean, if you live in New York, you'd be paying 20% to the federal government, maybe a Medicare surcharge, state and local taxes. You could be paying 35 to 40% of the gain in taxes. Many Berkshire Hathaway shareholders tend to be tax averse, just like Warren Buffett. So I think, yeah,

I think people are going to probably stick with Berkshire and may not have the magic that it has had under Buffett. But, you know, the company, obviously, he's living in very good shape. So I think most longer term investors are probably going to stick with it.

I want to ask you another question, Andrew. Jason Zweig, who's a columnist at the Wall Street Journal, had a very interesting piece this weekend. He argued there will never be another Buffett for three reasons, the person, the time period, and the package, or the company's self-reliant structure. Do you agree with that assessment?

That's probably true. Buffett began investing when he was essentially 12 years old in 1942. He's been doing it now for over 80 years. He's been investing when it was a much less crowded field.

And it was easier to find opportunities, easier to find bargains. He built the insurance business before now. Everybody, it seems, on Wall Street in the alternative asset world, KKR, Blackstone, Apollo were building their insurance businesses. So he had a head start on doing that. He was very prescient about doing that. He bought Coke.

In the 1980s, when it was trading for 10 or 15 times earnings, the stock is up, the position is up more than tenfold since then. He was relatively early into Apple, I mean, about almost 10 years ago. So, I mean, he's made some very good moves. And also, I think, you know, his approach is distinctive and interesting.

I think it's not easy to match, even though you've got thousands and thousands of people, hundreds of thousands, I mean, analyzing the market and looking for stocks. And the reality is that aside from Apple in the past 10 years, I mean, Buffett has not had a lot of big winners. Japanese trading companies have done well, but Occidental Petroleum, which was a big purchase, is in the red. A number of other stocks that he bought like Paramount have not worked out. So he doesn't bat a thousand.

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Now we will leave Berkshire for just a few minutes and look at some other things happening in the market, namely corporate earnings. There's a parade of earnings this week. Ben, so far, 357 of the S&P 500 companies have reported first quarter results. Give us a summary of how things are going.

They're actually going quite well. I mean, 74.2% have topped estimates, and that's well above the long-term average of 67%, and just a little bit lower than the four-quarter average of 77%. But given the headlines, I think people looking at this will take that 74.2%. And when you look at how it's pacing, we're actually pacing to have earnings up 13.6%.

for the first quarter, which is a pretty fantastic number. It got a very big boost from the Magnificent Seven, who reported last week. And revenue is not great. Again, it's 61.2% have topped expectations. That's right around in line with both the long-term average and the past four quarters. Revenue is expected to grow about 4.6%.

So you look at that and it's not bad. And I think that is one of the big reasons we actually have had this, you know, the S&P 500 heading in today is on a nine day winning streak. When you start seeing those earnings start to turn up like that, to come in better than expected by the

that much. I think it does help the market. You know, the S&P is now down just 5.5 percent over the past three months. It's made back most of the losses that it had following Liberation Day and is still up about 9.3 percent over the past 12 months. This speaks to the strength of the underlying economy, if you can have earnings growth like this.

I think it speaks to the ability of corporate America to, I mean, you look at that gap between sales growth and earnings growth. And I think it really points to corporate America's ability to keep those margins high and rising, whether that's because of perhaps AI being used or other factors, I think remains to be seen. But one of the things that has driven this market, and I think U.S. exceptionalism relative to the rest of the world, is that we do have much higher profit margins. And so if

the U.S. can maintain that, there is a real room for this rally to continue. All right. Let's talk about some specific companies. Palantir Technologies reports today. Barron's had a big piece about it this weekend. Investors are enthusiastic about the company. They don't really care about the price. And that price has risen more than 400 percent over the past year. So what's on tap on Palantir reports?

Oh, man. I mean, this is one where it just feels like the fundamentals are not what matter here. It's supposed to have a profit of about $0.13. That would be up $0.05 from a year ago. Sales are rising as well. But the stock just keeps going up. It's up 51% over the past three months. It's up 433%.

over the past 12 months. I mean, just a monster. Some people compare it kind of to Tesla in the sense that Tesla wasn't really earning a lot of money. The stock just kept going up, but people couldn't explain it. And then it sort of was able to demonstrate at some point that it actually was a real business. Now it has to demonstrate again that there's more coming in the terms of its AI, the robotics, the self-driving cars, et cetera. And I think that's kind of where Palantir is in that kind of early stages.

One risk right now is that the company, it does AI. It does a lot of work for the federal government, including in defense, in crunching numbers and helping figure out what needs to be done. And one of the big risks there is that the Fed, with all this talk about with Doge and trying to control expenses, that Palantir could be in the firing line. The other side of it is that the stock is very, very expensive. It trades at $1.

the multiple that UBS throws out is a 123% sorry, 123 times 2026 free cashflow estimates, which is just almost, can I call it a ridiculous valuation? But the, the,

The bulls look at the stock and they think, you know what? What is done in the government space, in the defense space, it can do for commercial companies. And that's really where the argument is coming in. If they could do that, then this company, I mean, the sky really is the limit. It can maybe even grow into that valuation. But that question is not going to be answered with this earnings call. Whenever I see a stock

gain this much this quickly. I always worry heading into earnings, but I do. I look at the chart. The stock has just looks like it's getting just above an all time high or right to its all time high. These numbers are better than expected. There's no reason this rally can't keep going. It's been incredible so far.

So let's talk about Supermicro Computer. This is an AI server supplier. The company has had some troubles. The stock is not up 400% over the past year. It's down 57%. Supermicro reports Tuesday. Tell us more.

I mean, so much depends on the moment that you look at Supermicro. I mean, it's incredible because at one point it was the best performing stock. This would have been kind of mid-February. It was the best performing stock in the S&P 500 this year. But it's pulled back. It did pre-announce earnings earlier. It was disappointing. I think the problem with Supermicro is that it really is basically it does AI servers.

And so it is completely dependent on both the AI trade, people needing more service to run these data centers and these AI projects. And they also have a lot of competition coming from companies like Dell. And this is, you know, there's some challenges there.

Um, and so, you know, they've also been controversial in terms of, you know, they were accused of, uh, um, some tax shenanigans, which, uh, looks like that that's all passed. Um, but, uh, you know, it's, it's a tough one and it is so volatile that it is really hard to know, um,

And just what to expect from it. As you said, it's down 57% over the past 12 months, but it's up 18%. Earnings are supposed to come in at about 30 cents a share and revenues are rising. But it's one that I have a tough time just being able to trade just because it is so volatile and it just goes up, it goes down and you're never quite sure which one it's going to be. I was going to ask you, do people own this stock or do they only trade it?

I suspect there's some people that own it. I suspect it is a pretty big trading vehicle, though. I would think so. All right. We're going to move on to Applovin. Now, that's a stock whose name I'm loving. The stock has rallied about 310 percent in the past year. What does Applovin do and why does the market love it?

Yeah, there's a rumor out there that the name comes from this movie Superbad that was popular a number of years ago where there was a character named Mick Lovin. Well, it wasn't his real name. It was an alias that he went by, a teenager who went by that name. And that this, when he was looking for a name, this kind of just came off the tip of his tongue and he's like, I'll go with it.

It is one of the most more ridiculous names out there. You know, they help their bread and butter has been helping online and mobile gaming get in front of users and really build their audience. And right now, they're the big argument about them is that they're trying to expand from that into other businesses beyond video games to help e-commerce brands.

And there's a big debate about it. There was a short report that hit the stock. Applovin is trying to show that this thing that they have actually does help. LightShed was noting that they've actually been putting out case studies to show how they've helped some of these brands. There's one called Pros. I guess they're

a hair and skin care company that they say that they've helped a lot. But this is just a huge debate. I mean, if they can do for e-commerce what they've done for video games, for online gaming and mobile games, it's a big deal. But that's the big question there. The stock is down 17% over the last three months. It's up 310% over the past 12, though. Earnings are supposed to come in at $1.78. That'd be up from $1.26.

sales are rising too. So this will be an interesting report. I don't know if Andrew had thoughts, and I know you thought this was kind of interesting just for the controversy around it. No, I think you really covered it pretty well, Ben. All right. So time for some car talk. Ford reports today after the market closes. And obviously automakers have been in the news because of tariff announcements. Tell us what's on tap for Ford. What can investors expect to learn?

You know, this is a really tough spot for basically any car company right now. I agree. You know, we saw a GM report. You know, they couldn't give much new information because they just don't know. Then they had to withdraw their guidance. The folks over at RBC see the same thing happening. They just think that Ford's going to have to withdraw the guidance or they're going to have to put it at the bottom end of the prior guide. But, you know, I would be surprised if it is...

uh done as uh if they just with withdraw it um you know there's some that think that could be a a good thing for the stock i mean these guys have been beaten up a lot um but it's it's really tough and the problem is that the longer the um uh this goes on the greater the risks grow um there's um

RBC was looking at kind of a perma-tariff scenario, and they think that could cause shares to fall 60% to $4 a share if they stay at these kind of levels. And the worry is that

you know, Deutsche Bank, we'll talk about Rivian in a moment, but Deutsche Bank made a comment about Rivian that they think that auto tariffs could be stickier and that they won't go away because it's just such a cornerstone of America's new industrial policy is what their words were. And if that's the case, I mean, they're just in a really tough spot. So it's going to be interesting to see what happens. The stock is

been, you know, up about 2% over the past three months down 17% over the past 12. It's, it's almost funny because they've had some quality control problems. Um, but those are so like, it just feels like that's not the important thing right now. Um,

And so we'll see what happens. It's just going to be there. Just the car makers are in a really tough spot from tariffs and it's hard to figure out. What does it mean for car buyers? It means more expensive cars. You know, it's the prices are going to go up. Used cars. I mean, it just means, you know, used cars are going to be more sought after. But the prices are probably going to go up there just because of the demand side of things.

People might hold on to their cars longer. You know, it's I think when we picked AutoZone, it was kind of for that that reason that for, you know, the parts suppliers, people are going to want to keep their cars running. So they're going to they're going to buy parts and and try to fix up what they have. So it's just if these tariffs stay in place, it really does change things for for car buyers, car makers.

Yeah, I mean, I might add, Lauren, I think the Ford dividend is 5%, and you might check on that. I think people are at issue about whether that's going to be maintained. They've also been losing a ton of money on electric vehicles as well. So we'll watch to see what happens there.

Yeah, Al did a nice, our income column this past week was on Ford's dividend. And yeah, there is a lot of worry there just because can they keep the free cash flow coming to be able to support it? And I'm sure that people will be listening for any comments they make about that on the call. Yeah, I'm glad you brought that up. You also mentioned Rivian, which is an electric car maker. And the company reports tomorrow. Let's have a look at Rivian's earnings and then let's look at its market position.

Well, let's talk about Rivian's losses. They're supposed to lose $0.73 a share. That would be a smaller loss than a year ago when it lost $1.24, but it's still a money-losing company. Sales were supposed to come in around $997 million. That would actually be down a little bit from

1.2 billion, but they do have a new car coming. And Andrew pointed this out to me, but there's this sense that perhaps it benefits from people's dislike of Elon Musk, that those who would have bought a Tesla in the past are maybe looking at Rivians. And there's something that I think to be said for that argument. When I look around, I'm from Denver. When I visit my folks, I see a lot of Rivians in Colorado. I even have one on my block in Brooklyn.

And, you know, so I can see that actually being something that does help them. Deutsche, when looking at it, they say that they actually that Rivian is probably has the cleanest setup because it doesn't have a lot of exposure to tariffs. It has a new car coming out. And but you do have to worry about execution risk. Andrew, your thoughts on Rivian?

No, I mean, I think one of the big issues is going to be whether the backlash against Elon Musk among progressives who've been, you know, the big buyers of Tesla cars and who now view them as almost anathema is going to benefit Rivian. And I think you could see some benefit there. We'll have to see. Yeah, I mean, I love these bumper stickers that you see around Brooklyn that say, I bought this Tesla before I realized Elon Musk was a, you know, fill in the blank. Yeah.

And yeah, you can see that Rivian possibly becomes a beneficiary. All right. We're not filling in the blanks here, but I get the picture. Let's talk about Occidental. The company reports this week it is also a very big Berkshire holding. Well, Ben, you'll cover the earnings first. And then, Andrew, we have a lot of questions about Buffett's stake in Oxy.

Yeah. You know, Occidental actually pre-announced in April. And the stock, you know, it hasn't been a good stock. It's down 13% over the past three months, down 37% over the past 12. It's underperformed significantly.

other oil producers. And for a good reason, I mean, it has a pretty levered balance sheet. It's long-term production growth is a little bit slower. I mean, there's, there's other reasons. And, you know, it's just, it's an oil prices are now dropping, which is a problem as well. So it's expected to have a, you know, it's going to,

do this again. No one's expecting much of a change. Seventy eight cents on earnings and six point eight billion on sales. But it does feel like this has been a I mean, Andrew, I want to hear your view. This has been a pretty bad bet made by Buffett.

Yeah, I mean, this has not been a great investment for Buffett. Berkshire began buying the stock in 2022. It owns about 28% of the company right now, more than 200 million shares. We estimate that Berkshire's cost basis is in the low 50s. The stock is right around 40 now. But the big development recently at Oxy was

an offhand comment that Vicki Hall, the CEO, reportedly made to Forbes magazine that her dream would be to become part of Berkshire Hathaway, to be wholly owned by Berkshire Hathaway. And Buffett has said in the past he's not interested in buying the rest of

Occidental, and he was not asked about that at the annual meeting, which was a little bit disappointing. Many people hoped that he would be asked that question. It'll be interesting to see what Holub says or clarifies or elaborates on about her comment on the Occidental earnings call. Do we have any sense of what Greg Abel thinks of this position?

No, we have no idea what he thinks about it. I mean, I will say that when people talk about acquisitions at Berkshire, energy and utilities are right up his alley. Those are two areas he probably knows best. And people think that those may be two areas that he will focus on for potential acquisitions once he becomes CEO in 2026.

All right. Before we go into listener questions, I wanted to take one minute, Ben, and ask you about the big economic news this week. That is the Federal Open Market Committee will be meeting Tuesday and Wednesday. The Fed is not expected to change interest rates at this meeting, but there's a lot of talk about what could happen ahead. What's the setup going into this week's meeting and what do you expect?

Well, I expect nothing. You know, the payrolls number was too good. Inflation kind of, we don't know if tariffs are going to bring inflation. It still hasn't come down to the Fed's target. You know, it makes sense that Powell is going to want to

stay still. I know there's pressure from President Trump to cut, but there's just no real reason for him to do that yet. The market, according to CME FedWatch, the financial markets are pricing in four cuts by the end of the year. And we'll see if that happens. I know it is going to be this balance between

Does the economy, you know, what happens with the economy and what happens with inflation and which way does the Fed lean if the economy starts to weaken, but inflation doesn't come in? It's going to be it's a tough spot. And so I think, you know, the Fed has always talked about being data dependent. I think that makes a lot of sense. And then the main thing I think will be just for people listening to the outlook, you know, what?

which way do they seem to be leaning in terms of the risk? Is the risk more towards economic growth or towards inflation? And if it is more towards, you know, worry about growth, then perhaps that increases the odds of rate hikes and you get a bit of a rally coming out of the meeting. But it's going to be an interesting one to watch because on the surface, not much is going to happen. That's right. Our colleague Nicole Goodkin will be at the meeting and Barron's will be covering it live.

So now on to some listener questions. We have tons of them about Berkshire and other topics. So Andrew, I'm going to start with Lee, who wants to know whether anything was said at the meeting on whether Berkshire will continue to hold its apple stake.

No, Buffett did not address that. Berkshire owns 300 million shares of Apple. It cut its stake by about two thirds last year. At one point at the peak, it owned about a billion shares. Interestingly enough, Berkshire in the past in its 10Q has reported the size of its five largest equity holdings, which would have included Apple, but it stopped

doing that with this latest 10Q. I don't know why it happens, a little bit disappointing. I mean, Berkshire's disclosure can be somewhat spotty, and on this one, it's a little bit disappointing.

All right. We had a question from David. Did Buffett hint that investing in Japanese stocks is a good way to diversify for individual investors? And I will broaden the question and simply ask, did he say anything about his Japanese stocks? He didn't really say much about it. I mean, there's been a lot of speculation that Berkshire is going to be more active buying Japanese stocks. There's been little evidence of that besides the five Japanese holding companies.

Berkshire owns about 24-ish billion of those five companies. That's been where he's focused from all we can tell. So I think I wouldn't read too much more into it. Many value investors like the setup in Japan, but Berkshire, it's not clear what more the company's been doing over there.

All right. We had a question from William. This concerns Ajit Jain. He notes that Ajit is getting older, aren't we all? But you mentioned that he's in his 70s. And William wants to know who will replace Ajit as head of the insurance business.

Well, I mean, that's very much unclear. I think it's a reasonable bet that Ajit Jain retires in the next few years. I mean, he might retire even soon after Greg Abel takes over as CEO next year. He's very close to Warren Buffett. He and Buffett talk apparently every day. I mean, I would say one of the top candidates is Joe Brandon. Joe Brandon's a veteran insurance executive. He had been the CEO of Allegheny, which is an insurer that Berkshire bought in 2022. He's in his mid-20s.

I think in his mid-60s right now, he's very engaged, a very sharp insurance guy. And he's one potential candidate to replace Jane as head of the Berkshire Insurance Operations, which are some of the biggest in the world. Berkshire is the biggest property and casualty insurer in the world right now.

So David had another, excuse me, William had another question as well. It involves Ted Wexler and Todd Combs. You mentioned them before. They run a portion of the portfolio. Is there any information about their performance returns?

No. I mean, Buffett, the last comment that I'm aware of, he said in 2019 that they were slightly behind the S&P 500, both of them, since they came to the company more than a decade ago. I don't think we've gotten any updates since then. Many people have wondered about that. I believe they're probably behind the market in the last five years based on what we think they may own. Their positions tend to be some of the smaller positions that –

Berkshire has, including companies like DaVita, Sirius XM, Amazon, and some others. And so it's a big question mark in terms of what role they're going to play in the future with the portfolio under the Greg Abel regime. And we're still awaiting details on that.

All right, next question comes from Nicholas. Which of the following would be the best acquisition target for Berkshire? And he mentions Chubb, the insurer, the rest of Oxy, or either D.H. Horton or Toll Brothers, the home builders.

I think all three of them might be good acquisitions. I don't know whether Chubb wants to sell. Evan Greenberg, who heads that company, is a very strong-willed executive. I doubt he wants to go to Berkshire and work for Warren Buffett. I think Chubb likes his independence. I don't know whether Berkshire wants to

add even more to its already large position in insurance by buying Chubb. But Chubb is the industry leader, got some of the best underwriting results, a class act. Occidental, the advantage there, the stock is down. It's around 40. It was high at 70 earlier in the last year or so. If Berkshire wanted to buy the rest of it, it might cost another $35, $40 billion, which is a drop in the bucket

compared to its cash of about $335 billion. It might be a good acquisition given that Greg Abel likes the business. Toll and D.R. Horton are interesting situations as well. Homebuilders have been under pressure, and Buffett likes the business. It already owns Clayton Homes, which is a manufactured homebuilder. Both Horton and Toll had family ownership, if not family control, but significant family ownership. Both the

The key people, two of the key people at each company have died in the last couple of years, Bob Toll and Mr. Horton. So that could open it up. But Berkshire is given no indication that it wants to buy a home builder, even though many people think that would be a good acquisition for them. Interesting. All right. I like to give Ben some questions, too. It's only fair. So we have an interesting question from Joseph Ben.

He notes that the 90-day postponement of the reciprocal tariffs is ending soon and the debt ceiling deadline is coming soon. So these are two big events. There are a lot of downsides if things don't work out. And he notes that all is not well despite the recent rise in the markets. I'm going to ask what you think, given these things happening in the background and given the market's recent rally. How do you read the market at this point?

I mean, that's absolutely right, that there are these events sitting there that are just looming as potential reasons to sell the market. There are other reasons that could pop up, things that we probably aren't even thinking about. We've talked about we don't really know what's happening between the U.S. and China, and that's really the big one. We hear about ships being empty, the ports not having any

any work to do. That's kind of, kind of frightening. But there's the other side of it. And that is that things could go well. Also, we, you know, we keep hearing about a deal ready to be signed and haven't seen it yet, but if one comes that, that could be something that could be either a good or, you know, it could be create a sell the news event, but could also be so good that it, and gets people to think, okay, more deals are coming.

and the market goes up. And there's also a lot of talk out there right now just about the fact that at some point, if Trump keeps backing down on tariffs, but at the same time turns towards tax cuts and deregulation, that could be another reason to spur the market higher. And I think that with that kind of as the backdrop, you look at how the market is trading now, and it kind of makes sense. We've had this, the big drop was when those tariffs were first announced. And the

The big rally since then has been because the worst have been dialed back a little bit. At least there's hope that it will be dialed back. But we also can see that the market is still down quite a bit since it peaked in February. It's still down from those highs.

And I think that it's below its 200-day moving average. I think that right now it does feel almost like a binary choice. Are you going to rally back to those highs or are you going to drop and hit new lows? And honestly, I don't know. I mean, it's one of those things where I wish I did. I think when you've had this great rally, it's a good time to maybe take a little bit of risk off to make adjustments to portfolios if you hadn't done so and you feel like you need to, and then just wait to see what happens. All right.

Good answer. We had a question from Gary, Andrew, about the investing mood of the crowd at the Berkshire Hathaway annual meeting. Kind of relates to what Ben was talking about. Were people bullish, bearish, nervous, out of the market? Did you get any sense in your talks with people?

No, I don't really have a good sense. I think I'll pass on that one. Okay, fair enough. I had a question I wanted to ask from Samip. He mentions an ETF, OMAH, which recently launched and has some of the largest Berkshire-owned positions, along with 15% annual return through options-generated income. I am not familiar with this. Are you?

No, I'm not familiar with it. I think I'll pass on that one too. Okay. Probably something to look at, but not today. And looking at a few other questions, which particular stock, Samip also asks, within the Berkshire portfolio is undervalued, which particular company or business is undervalued at the moment and could require investors' attention? I guess we were talking about the investment portfolio.

Well, I mean, I'll tell you what the five biggest ones are. They're Apple, Bank of America, American Express, Coca-Cola, and Chevron. So, I mean, oil's out of favor. I mean, so, I mean, we did a bullish article recently at Barron's on Chevron. So, you know, that could be worth a look. It's got a decent dividend. Occidental, which has been, which is very much out of favor. It's kind of a levered oil and energy play. So if you're bullish on oil and natural gas, it could do well. Plus, you potentially have the, of

Berkshire getting involved. I mean, Coca-Cola has had a nice run this year. It's way outperformed PepsiCo. So, you know, it's not it's not a cheap stock right now. Apple is kind of rallied off the lows now. It's trading for probably around 30 times this year's earnings. So and Bank of America has come down a little bit with some of the banks. So Bank of America is trading for a kind of a low double digit multiple of earnings right now.

I wanted to ask your opinion about energy. Unbelievably, Berkshire is just a fraction of what you cover here at Barron's. What do you think about energy stocks at the moment, stocks like Chevron and Exxon?

I don't really have a strong opinion about the stocks. We've written favorably on Chevron. Clearly, weak oil prices are a negative. I think the oil price has been far weaker this year than many people and many investors and analysts anticipated. If oil prices stay at these levels, it's not going to be good for the industry, even though many companies do have businesses.

break-evens, which are probably lower than this. But I mean, no company is going to make much money with oil at these levels. Fair enough. And we had a question from Ben, I don't think it's our Ben, about Berkshire Hathaway Energy, which you have written about. Can you give us a little insight there?

Well, I mean, it's a diversified utility. They own natural gas pipelines. They've got a real estate brokerage business. But the core business is basically electricity generation. They're probably, if not the largest, one of the biggest producers of renewable power. Many analysts value the company at around $90 to $100 billion. But

Berkshire paid a valuation only around $50 billion when it bought a stake from the estate of Walter Scott, a former Berkshire director last year. And that kind of got people's heads scratching in terms of what the business is really worth. Buffett suggested that the value of BHC Berkshire Hathaway.

energy has gone down in the last couple of years and that's what accounted for the low price that was paid to the scott estate but many investors and analysts think that he's being too pessimistic about it and that the business is worth a good deal more than the 50 billion dollar number that was uh set at the scott purchase berkshire now now owns 100 of it and so it's an interesting business and one of the most valuable parts of berkshire in fact uh

In terms of capital investment, it's one of the places inside Berkshire where some of the most capital is being invested, probably about $10 billion a year. They're investing in renewables and also in the grid transmission. So it's a very dynamic part of Berkshire. It doesn't earn huge returns. It earns generally about a 10% return on invested capital, but it can stop up a lot of capital. It's kind of a way you stay rich rather than get rich type of business. Interesting. Thank you.

All right, we're going to close with a wonderful quote from Warren Buffett and a question for each of you. Rich notes that Warren Buffett has often said, be fearful when others are greedy and be greedy when others are fearful. And Rich wants to know, are we in a fearful or greedy market? Ben and then Andrew.

I don't think we're fearful. You know, it's been a big move, but I think there are a lot of people that, you know, still think that this is just a correction in a bull market like we've seen many times. And, you know, I think even Buffett has said,

pointed out that uh you know fear is what it looked like in you know 2000 and in a 2009 um it's kind of what happened after the dot-com bubble popped it took a while you had these bounces and but it took a while before it really settled in to you know people got the fact that you know what this bubble has popped and this is not going to be good

um and so i think that if this is a bear market we don't know the answer yet um that we're still in the very early stages of it and that the uh that this is not fear yet andrew fearful or greedy market

No, it's not. It's not a fearful market. And I think you had a dip in April that got a lot of investors excited. But I think the mentality in the stock market is to buy any dip, to look favorably that Trump is going to bend or relent on tariffs. I will say I was with an investor group.

a dinner in Omaha with about 50 or 60 people the night of the meeting. There are many value investors. They think small to mid-cap value space remains very attractive. There are a lot of interesting opportunities there. So that's an area that investors may want to take a closer look at, even though it's been true for quite a while. So there's been a big gap in valuations and performance between small and mid-cap stocks and the big stocks in the S&P 500. So

that may be an area that is worth looking at. I think Berkshire would probably be doing more in that area if it weren't so big. It's a good place to leave it. We ran a little long today, but boy, was it worth it. Thank you, Andrew, so much for sharing your insights. And thank you, Ben, as always.

Next week on Barron's Life, Ben and I will be speaking with Christopher Rosbach, Chief Investment Officer of Jay Stern, an investment partnership with Roots in Europe. Christopher is a savvy growth stock investor, and he too was at the Berkshire annual meeting. He wrote to me Saturday afternoon from Omaha, and he said it had been a momentous and emotional day. I always enjoy speaking with him, and I think you'll enjoy hearing his market insights next week. Until then, everyone, stay well and have a wonderful week.