(Reuters) – Warren Buffett’s enthusiasm for the future of America and his company Berkshire Hathaway Inc has not been dampened by the coronavirus pandemic.
Buffett uses his annual letter to investors to ensure that he and his successors will be careful stewards of their money in Berkshire, where ‘the passage of time’ and ‘an inner calm’ will help serve them well.
Despite the disappearance of more than 31,000 jobs from Berkshire’s workforce last year, Buffett maintained his brand optimism and repurchased a record $ 24.7 billion of his share in 2020 in a sign he considers undervalued.
He also praised the economy’s ability to endure ‘serious disruptions’ and enjoy ‘breathtaking’ progress.
“Our unwavering conclusion: Never bet against America,” he said. ((here))
Tom Russo, a partner at Gardner, Russo & Gardner in Lancaster, Pennsylvania and longtime investor in Berkshire, said: “He believes deeply in his company and the country.”
The letter breaks an unprecedented silence for 90-year-old Buffett, who has been almost completely invisible to the public since Berkshire’s annual general meeting last May.
But while touching on familiar themes, including bankrolling Wall Street bankers for transaction fees that favor them more than companies they represent, Buffett did not dwell on the pandemic, a major factor behind Berkshire’s job losses.
Nor did he pay attention to recent social upheavals or the divided political environment that some companies are now directly addressing.
“The letter emphasized the innovation and values that have become the backbone of America, and it is perfectly acceptable,” said Cathy Seifert, an analyst at CFRA Research, with a ‘hold’ rating on Berkshire.
“Given the respect investors have for him, the letter was striking for what it left out,” she added. “A new generation of investors demands a degree of social awareness, and that companies like Berkshire set out their beliefs, standards and goals.”
Buffett also indicated a long-term commitment with Apple Inc., where Berkshire ended 2020 with $ 120.4 billion worth of shares, despite selling billions of dollars.
He calls Apple and the BNSF Railway the most valuable assets of Berkshire – ‘it’s quite a throw’ – apart from the insurance business, and that ahead of Berkshire Hathaway Energy. “The family jewels,” he calls the four investments.
PROFITS INCREASE AS LOSS OF JOB LOSSES
Berkshire also reported net income of $ 35.84 billion in the fourth quarter and $ 42.52 billion for the year on Saturday, both reflecting large gains from its shares.
Operating revenue, which Buffett considers a more accurate measure of performance, fell 9% for the year to $ 21.92 billion.
Share repurchases continued into 2021, with Berkshire repurchasing more than $ 4 billion of its own stock. It ended 2020 with $ 138.3 billion in cash.
Buffett, however, regrets fixed income as an investment and says that “bonds are not the place to be these days.” Revenue from a ten-year U.S. Treasury bond fell 94% from a return of 15.8% in September 1981 to 0.93% at the end of 2020. Benchmark Treasury yields have risen since then, but have by historical standards still low.
“Fixed-income investors worldwide, whether pension funds, insurance companies or retirees, are facing a bleak future,” the letter said.
Berkshire, based in Omaha, Nebraska, has more than 90 operating units, including the BNSF Railroad, the Geico Car Insurer, Dairy Queen Ice Cream and See’s Sweets.
Its staff has decreased by 8% from a year earlier to about 360 000 employees. Larger declines were reported at BNSF, which cut off 5,600 jobs, and See’s, where jobs fell by 16%.
The pandemic did not hit any Berkshire business harder than Precision Castparts Corp, which lost 13,473 or 40% of its jobs.
Berkshire bought the aircraft and industrial parts manufacturer in 2016 for $ 32.1 billion, Buffett’s largest acquisition, and took a $ 9.8 billion write-off as the pandemic reduced travel and punished Precision’s aviation customers .
“I paid too much for the company,” Buffett wrote. ‘I was simply too optimistic about PCC’s normalized profit potential.
“PCC is far from my first mistake of its kind,” he said. “But it’s a big one.”
Berkshire said some businesses are starting to recover from the pandemic.
“Definitely 2021 is going to be a much stronger year, depending on the speed of vaccinations and the opening of the U.S. economy,” said Jim Shanahan, an analyst at Edward Jones & Co., with a “buy” rating on Berkshire .
Buffett also said that Berkshire’s annual meeting will take place in Los Angeles rather than in Omaha, which will have 97-year-old Vice President Charlie Munger, a Californian, rejoin him and answer about 3-1 / 2 hours of shareholders’ questions. .
Vice-chairmen Greg Abel (58) and Ajit Jain (69), who are widely seen as frontrunners to succeed Buffett as CEO, will also be available to answer questions.
Buffett said he hopes Berkshire will resume its annual shareholders’ weekend in Omaha in 2022, which normally draws about 40,000 people – an ‘honest-to-God, Berkshire-style annual meeting,’ he wrote.
Reporting by Jonathan Stempel in New York; edited by Megan Davies, Alden Bentley, Marguerita Choy and Cynthia Osterman