(Bloomberg) – Warren Buffett’s 15-page annual letter to 15-page shareholders on Saturday mentioned the pandemic that plagued the world exactly once in 2020: one of its furniture businesses had to close for a while due to the virus. the billionaire said. page nine.
Buffett also kept away from politics, despite the controversial presidential election and riots at the U.S. Capitol, and never touched on race or inequality, even after protests and unrest erupted in cities across the country last year. He also avoided delving into the competitive pressures facing his conglomerate Berkshire Hathaway Inc. facing, a subject that is frequently analyzed in letters of the past year.
‘Here you have a company with such a revered leader who is so highly regarded – whose opinion is important, who has businesses directly affected by the pandemic, insurance companies affected by global warming and social inflation – and there was no one word about the pandemic, ”said Cathy Seifert, an analyst at CFRA Research, in a telephone interview. “It was striking to me. It was deafening and disappointing. ”
Buffett, 90, has been extremely quiet since last year’s annual meeting in May amid a multitude of issues facing Americans. His annual letters are often seen as an opportunity to help investors understand his thinking on broad topics and market trends, in addition to details on how his conglomerate is doing.
But the Berkshire CEO weighs his words carefully, and some topics, such as the pandemic, run the risk of moving into highly controversial political territory, said Jim Shanahan, an analyst at Edward D. Jones & Co. said an interview.
‘There have been many comments about the pandemic and its impact on businesses, but by not saying anything in the letter, I think it’s just a way of trying to avoid saying something that is political statement can be considered, which he has been less willing to do in recent years, ”Shanahan said.
A Buffett representative did not immediately respond to a request for comment that was posted outside normal business hours.
Buffett has also remained silent on topics that are key to his conglomerate, such as the market environment in the midst of a turbulent year – and the work of key deputies such as Todd Combs and Ted Weschler, according to Cole Smead, whose Smead Capital Management oversees investments in Berkshire.
“More is found by what is not in the letter,” said Smead, the president and portfolio manager. “I just think in this letter there have been sins of failure time and time again.”
Here are other important tasks from the letter from Buffett and Berkshire’s annual report:
1. Buffett relies on buybacks instead of offers
Berkshire bought back a record $ 24.7 billion of its own stock as Buffett struggled to find better ways to invest his huge pile of cash.
And there’s even more where it comes from: the conglomerate has continued to buy its own stock since the end of last year, and is likely to stick to it, Buffett said in his annual letter on Saturday.
“Those actions increased your ownership in all of Berkshire’s businesses by 5.2%, without you having to touch as much as your wallet,” Buffett said in the letter, pointing out that in 2020 the company “did not make any significant acquisitions”. do not have”.
Berkshire made little progress in mating the cash stack, which fell 5% to $ 138.3 billion in the fourth quarter. Buffett has struggled to keep up with the flow over the past few years, as Berkshire cashed in cash faster than he could get higher-yielding assets to magnify, leading to the increase in share buybacks.
2. Apple is as valuable to Berkshire as BNSF Railroad
Berkshire’s $ 120 billion investment in Apple Inc. shares has become so valuable that Buffett puts it in the same category as the sprawling railroad business he built for a decade.
He started building a stake in the iPhone maker in 2016, spending just $ 31.1 billion to acquire it all. The increase in value since then places it among the top three assets of the company, along with its insurers and BNSF, the U.S. railroad purchase completed in 2010, according to the annual letter.
“In some ways, it’s his kind of business,” said James Armstrong, who manages assets, including Berkshire shares, as president of Henry H. Armstrong Associates. “It’s very brand name, it’s worldwide, it’s an absolutely addictive product.”
Buffett has always refrained from technology investments, saying he does not understand the businesses well enough. But the rise of deputies, including Combs and Weschler, has brought Berkshire deep into the sector. In addition to Apple, the conglomerate has built up interests in Amazon.com Inc., the cloud computing company Snowflake Inc., and Verizon Communications Inc.
3. Buffett Concedes error in $ 37.2 billion transaction
Buffett admitted that he made a mistake when he bought Precision Castparts Corp five years ago for $ 37.2 billion.
“I paid too much for the company,” the billionaire investor said in his annual letter on Saturday. “No one misled me in any way – I was simply too optimistic about PCC’s normalized profit potential.”
Berkshire last year wrote off a write-down of nearly $ 11 billion that was largely linked to Precision Castparts, the manufacturer of aerospace and energy equipment in Portland, Oregon.
The pandemic was the main culprit. Precision Castparts struggled because demand for flights dropped, prompting airlines to park their planes and reduce their schedules. Less flying means lower demand for replacement parts and new aircraft. According to Berkshire’s annual report, Precision reduced its workforce by about 40% last year.
4. Profit profit thanks to railway, manufacturers
Despite the aftermath of the pandemic that continues Berkshire’s collection of businesses, the conglomerate showed a 14% increase in operating earnings in the fourth quarter, compared to the same period a year earlier.
This has been helped by a record quarter for the BNSF railway since the acquisition in 2010 and one of the best quarters for the manufacturing operations since mid-2019.
5. Goodbye Omaha, Hello Los Angeles
For years, Berkshire’s annual meeting has drawn crowds of Buffett fans to Omaha, Nebraska, where the conglomerate is based. This year the show is moving to the West Coast.
Although it is still virtual due to the pandemic, the annual meeting will be filmed in Los Angeles, the company said Saturday.
This will bring the event closer to the home of Buffett’s longtime business partner, Charlie Munger. Buffett and Munger will be with two key delegates, Greg Abel and Ajit Jain, who will also ask questions.
Buffett and Abel, who live closer to Berkshire’s headquarters, faced a dark arena, 18,000 empty seats and a camera at an annual meeting last year, Buffett said in his letter. The 90-year-old billionaire said he expects to hold a personal meeting in 2022.
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