- Warren Buffett could be "one of the large beneficiaries" of the pandemic, a Berkshire Hathaway shareholder told Business Insider this week.
- The famed investor can put Berkshire's massive cash pile to work if the outbreak worsens, while Berkshire's earnings will rebound if the virus threat recedes, Pelican Bay chief Tyler Hardt said.
- "This inevitable recovery is not reflected in the current share price," he said.
- Buffett didn't have time to strike any big deals during the coronavirus crash, Hardt added, and called for the Berkshire chief to reduce his Apple stake.
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Warren Buffett disappointed many investors when he failed to deploy his Berkshire Hathaway conglomerate's $137 billion cash pile during the coronavirus crash, but one of his shareholders is still backing him to deliver the goods.
The famed investor and Berkshire CEO could be "one of the large beneficiaries of this tragedy," Tyler Hardt, whose Pelican Bay Capital Management oversees about $5.4 million in client assets, told Business Insider this week.
If the pandemic persists or worsens, Buffett can hunt for bargains and put Berkshire's cash to work, he said.
Moreover, when the virus threat eventually subsides, Berkshire's businesses — which include See's Candies, Geico, and the Burlington Northern railroad — will see their profits rebound, he continued.
"This inevitable recovery is not reflected in the current share price," Hardt added.
Berkshire's Class B shares have tumbled more than 20% this year to trade at $179, giving the company a market capitalization of $435 billion — a little over three times its cash pile, and less than 1.2 times its net assets.
Buffett's company is a key holding in Hardt's "concentrated value" portfolio, which returned 19% in the second quarter but is down about 36% this year, according to his second-quarter investor letter.
Pelican Bay's two other portfolios also made up ground last quarter but remain in the red for the year.
Time and money got in Buffett's way
The downturn earlier this year was too brief for Buffett to make any big moves, Hardt told Business Insider.
"The market collapse and subsequent rebound came so fast that there wasn't enough time to put together a needle-moving deal," the portfolio manager said.
Buffett famously swooped in during the financial crisis, throwing lucrative lifelines to Goldman Sachs, General Electric, Harley-Davidson, and other cash-hungry companies.
He couldn't repeat the strategy this time around because the US Treasury and Federal Reserve moved quickly to bail out struggling companies and shore up financial markets.
"Debt markets and liquidity normalized within weeks following government support and there wasn't time to put together one of Berkshire's large, white-knight, preferred-equity deals like we witnessed in 2009," Hardt said.
Buffett is still sharp, but he could make some changes
The Berkshire chief's lack of activity during the downturn led billionaire investor Ken Fisher to suggest he's slowed down in his old age, while day-trading celebrity Dave Portnoy dismissed him as "washed up."
However, Hardt pointed out that Buffett's answers during public appearances this year have been as thoughtful as ever, adding that he moved quickly to sell the "big four" airlines.
"He is clearly sharp and has the wisdom of decades of investing experience," the Pelican Bay chief said.
However, Hardt would like to see Buffett play to his strengths by striking more deals and adding new stocks to his portfolio.
"There are several businesses out there that are struggling with liquidity, that will survive and thrive when COVID subsides," he said. "Berkshire's fortress balance sheet could easily get these companies to the other side."
Hardt also touched on Berkshire's recent $10 billion deal to buy most of Dominion Energy's natural-gas business. While it "wasn't a steal," he expects Buffett to make a decent return and wants to see more of those types of asset purchases.
The portfolio manager also called for Buffett to cash out part of Berkshire's biggest holding, which has soared in value to north of $90 billion, and accounts for more than 40% of its portfolio.
"I would like to see him trim his Apple position," Hardt said. "The company faces several headwinds and the valuation is getting ahead of itself."
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