All of Buffett’s deals with China, Apple and oil
It was a strong quarter for Berkshire Hathaway, Warren Buffett's holding company. The financier would like less tension between the United States and China, but he is aware of the situation: he gives up on TSMC and focuses on Apple. And he insists on oil, despite the transition. All the details
“Anything that raises tension between these two countries is stupid, stupid, stupid,” Charlie Munger said at the annual meeting of shareholders of Berkshire Hathaway, the US holding company led by Warren Buffett of which he is vice president. Munger was referring to the relationship between America and China, the two largest economies in the world and fundamental trading partners for each other, but fierce rivals on the geopolitical level.
WHAT BUFFETT AND MUNGER THINK OF THE AMERICA-CHINA COMPETITION
Buffett and Munger agree that Washington could greatly benefit from an open trade relationship with Beijing, and have called on the two countries not to escalate the tensions, which concern competition for industrial competitiveness and leadership on the world order.
YELLEN'S SPECIFICATIONS ON DECOUPLING
A full commercial opening doesn't seem possible, though. Treasury secretary Janet Yellen explained well that the United States does not want decoupling (i.e. total economic decoupling) with China, and she essentially agrees with the two entrepreneurs when she states that "a growing China that plays according to the rules it can be beneficial to the United States”. However, he specified that America considers the "safeguarding of some critical technologies" to be "of vital national interest", such as the advanced microchips that power artificial intelligence and weapon systems.
AND INDEED, BERKSHIRE SPRINGS TSMC
Semiconductor companies, both American and foreign, have now realized that they will no longer be free to do business with the Chinese, given US export controls.
In an interview with Japan's Nikkei Asia newspaper last month, Buffett explained that geopolitical tensions were "a factor" behind the recent divestment from TSMC, the largest microchip manufacturing company: it's based in Taiwan, which China doesn't he considers a separate country but a province of his territory to be brought back under his control, even by force (although he has never governed the island).
In February, Berkshire Hathaway sold 85 percent of its shares in TSMC, which it had bought just a few months earlier (between July and September 2022) for $4.1 billion.
THE (EXTRAORDINARY) RESULTS OF BERKSHIRE HATHAWAY
Berkshire Hathaway reported profit of $35.5 billion in the first quarter of 2023, more than six times as much as it was $5.5 billion a year ago. Operating profit — Buffett's preferred metric — was $8 billion, up 13 percent year over year ($7.1 billion).
APPLE'S CONTRIBUTION
As Reuters notes, Berkshire Hathaway's fortune was also made by the increase in the value of Apple's shares, +27 percent. The holding company owns a $15 billion stake in Apple, which Buffett sees as a wonderful business because of people's devotion to its products, such as the iPhone. "I don't understand the telephone at all," said the Berkshire director, who is over 90, "but I understand consumer behavior."
BUFFETT'S MOVES ON OIL
In the first quarter of 2023, Berkshire Hathaway sold $13.3 billion in equity interests. Among these is the one in the US oil company Chevron, of which it has sold 28 percent (the holding's current stake is worth 21.6 billion). In the first quarter of 2023, Chevron's net income rose 5 percent to $6.5 billion, beating analyst expectations, thanks to high margins in the refining business.
Berkshire owns 23.6 percent of another major US oil company, Occidental Petroleum. Buffett has denied rumors of his intentions to acquire the entirety, declaring that the company has "proper management." Occidental CEO Vicki Hollub is on good personal terms with Buffett and is pursuing a line generally very welcome to shareholders : debt reduction and redistribution of rich dividends.
“Hollub is an amazing manager at Occidental,” Buffett said. “We love that Vicki runs it.”
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/warren-buffett-cina-petrolio-apple/ on Mon, 08 May 2023 09:15:41 +0000.