Bloomberg
Buffett’s letter to break months of silence amid tumult in US
(Bloomberg) – While 2020 raged, Warren Buffett mostly kept his tongue out. He remained silent through a fierce presidential election, a racial reckoning that sparked nationwide protests and a stock market outcry that gripped millions of Americans. Not to mention a global pandemic. The billionaire CEO of Berkshire Hathaway Inc. now has the chance to break his silence with the announcement of his annual letter on Saturday. Seifert, an analyst at CFRA Research, said in a telephone interview. “There is an appetite for his thoughts.” The letter is an annual tradition for the 90-year-old CEO, a chance to share wisdom with his loyal following of value investors. And Buffett is usually not shy about sharing wisdom, and has even campaigned in the past for controversial politicians, including Hillary Clinton. Its annual mission ahead of the 2016 presidential election touched on politics and shifted the negative drumming of candidates. It has been different since he said at the annual meeting in May last year that his cash pile was not nearly as large when considering the “worst case” possibilities of the Covid-19 pandemic. The CEO has since shared little, if any, of his views, even last year when President Joe Biden and former President Donald Trump shot in one of the most controversial elections in American history. In the 2020 letter, the subject is not mentioned. “Maybe he just decided there was no point in getting into the fight,” Seifert said. ‘He was a little more open when the general discourse was much more civil, and I can certainly understand a desire to pack your tent like that and go home and not take part in it. It’s not a salon game anymore. It’s a blood sport. ‘Long list If he decides to weigh in, there are many topics he can outline. How did he view the riots at the American Capitol in early January? What did he say to Biden during his conversation a few weeks before the election? What can investors make of the recent drama about GameStop Corp short sellers? and other shares? How about the rising stock market? And how should companies address racial inequality? His business partner, Charlie Munger, did not speak at the annual meeting for Daily Journal Corp, of which he is chairman, on Wednesday about the speculation of stock markets. He has brokers like Robinhood Markets Inc. condemned and said that they were essentially offering gambling services – a ‘dirty way’ to make money. There are also more nut-and-bolt questions for Buffett. Despite being beaten by the S&P 500 for more than 50 years at the helm of Berkshire, Buffett has outperformed the index for at least a decade. And his cautious stance at Berkshire’s annual meeting in May last year raised questions from some who wanted to see him be more aggressive in making new investments. Investors such as Darren Pollock said the strategy was retrospective given Buffett’s desire for Berkshire’s “” The fact that he was more cautious was quite good, “said Pollock, a portfolio manager at Cheviot Value Management LLC, which calls Berkshire its largest. “It’s better to miss an opportunity and stay in good financial condition than to make a big turn, and swing and miss and knock out.” Berkshire is also plagued by its size.The company has grown so large that only massive acquisitions can move the needle.But it was hard to find amid high prices and competition from buyers such as private equity firms.Even the company’s share purchases of $ 6 billion last year would make up just 4% of Berkshire’s cash pile at the end of the third quarter, and Buffett can now add to the recent boom in SPACs, or special-purpose acquisition companies, as another competitor “There are so many things now that I think the market will benefit from in terms of its wisdom,” said Jim Shanahan, an analyst at Edward D. Jones & Co., in a telephone interview. he mentions the rise of SPACs as well as’ GameStop, short sales, Reddit and the whole episode, but even just things like the underperformance of the stock, inflation, the stimulus – the size and perhaps the need for another s timulus. “It’s a long list. Here are more topics that may appear on Saturday: Succession While Buffett gives no indication that he will retire soon, investors are always on the lookout for clues as to how the non-farmer is doing, and he often uses the letter to talk to investors. joke and reassure. Last year, Buffett said he and Berkshire Vice President Munger, 97, had long since entered the “urgent area” in terms of their ages. But he tried to reassure investors that the company was well prepared for when the pair would finally leave. The future of the company has been telegraphed for some time now. Buffett elevated Greg Abel and Ajit Jain to vice presidents in 2018, promotions called “part of the move to succession.” He promised to provide the couple at the annual meeting last year with more platform for questions, but that changed when Covid-19 forced the meeting into a virtual format and limited attendance of Buffett and Abel, who are closer to Omaha, Nebraska, where Berkshire is based, resides. According to Pollock, investors will benefit if Buffett uses Saturday’s letter to share more about the impact of his investment. assistants, Todd Combs and Ted Weschler. One was the key to Berkshire’s bet Apple Inc., which is now the largest investment in the company, but the company usually does not say which CEO is responsible for a particular investment. However, it is known that Combs and Weschler have pushed Berkshire into more technology-focused opportunities, such as the recent investment in cloud computing company Snowflake Inc. All the MoneyBuffett has been blessed with a high-class problem in recent years: too much cash. Berkshire is still pulling in more funds than its CEO can quickly use in higher-yielding assets, which reached a cash pile of more than $ 145 billion at the end of September. Although he did not make any of the “elephant-sized” acquisitions he longed for, Buffett was still using funds last year. Berkshire challenged Japan by capturing the shares of various trading companies. The company also owns a number of natural gas assets from Dominion Energy Inc. bought. Berkshire recently held a $ 4.1 billion stake in Chevron Corp for months. and a $ 8.6 billion stake in Verizon Communications Inc. spend. What Bloomberg Intelligence says: “We believe that the record share repurchase of 2020 reflects a shortage of other options and Buffett’s conservatism in uncertain times. The company will need a great deal to move the results.” – Matthew Palazola According to Chlock, according to data compiled by Bloomberg, Chevron and Verizon are now among the most cost-effective way to park Berkshire part of its cash instead of owning more treasury bills. top three regular bets in Berkshire with the highest dividend yield, but Buffett still largely sticks to familiar areas, Berkshire knows the energy space well, and has bet on Verizon before.One of his biggest purchases last year was on the conglomerate’s own lawn: buying Berkshire shares, which cost about $ 15.7 billion in the first nine months of 2020, which already made it a record year for repurchases. more repurchases in the fourth quarter, with documentation indicating that by the end of October he had repurchased enough shares to bring the annual total to at least $ 18 billion. ‘If he had made a $ 18 billion acquisition, we would have called it substantial. , ”Said Shanahan of Edward Jones. According to Shanahan, the total repurchase last year until the end of October is ‘very important’, although the company is limited to how much it can repurchase due to the lack of liquidity in Berkshire shares. thoughts on the coronavirus in China. The pandemic will sweep through the US and the rest of the world, dropping shares in March and early April. Buffett, who told investors to be greedy when others were scared, remained unusually cautious in the early months and even dumped the airline. shares and claims that the world has changed for that industry. U.S. stocks jumped back sharply in the later months of 2020 and began climbing even further this year with the Reddit-induced mania surrounding certain stocks such as GameStop. Buffett’s loyal investment supporters may want to know what he’s making of the recent upheaval in the market, depending on whether he wrote this year’s letter before or after the phenomenon arose. The new-found exuberance of retail investors dates back to the mania of the dot-com bubble in 2001., when Buffett ridiculed investors ‘understanding of the market so that he could easily revive 20 years later:’ It was as if some virus ‘, Buffett writes in his annual letter issued that year,’ and he played wild among investors as well as amateurs, inducing hallucinations in which the values of shares in certain sectors were decoupled from the values of the enterprises that underlie them. Visit us at bloomberg.com for more articles like this. . © 2021 Bloomberg LP