Bloomberg
Buffett’s ‘Tone Deaf’ annual letter dresses are big controversy
(Bloomberg) – Warren Buffett’s 15-page annual letter to 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 noted . Page nine. Buffett likewise kept politics away, 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 of his conglomerate, Berkshire Hathaway Inc., a subject regularly analyzed in recent years’ letters. ‘Here you have a business with such a revered leader who is so highly regarded – opinions, who has businesses directly affected by the pandemic, insurance companies affected by global warming and social inflation – and there was no word on the pandemic not, ”said Cathy Seifert, an analyst at CFRA Research, in a telephone interview. “It was striking to me. It was deaf deaf and it was 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 and some topics carefully. Jim Shanahan, an analyst at Edward D. Jones & Co., said in 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 could be considered a political statement, which he has been less willing to do in recent years,” said Shanahan. Buffett also kept quiet about topics that are key to his conglomerate, such as the market environment in the midst of a turbulent year – and the work of key investment delegates 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,’ says Smead, the firm’s president and portfolio manager. ‘I just think time and time again in this letter were sins of failure. Here are some more important tasks from the letter from Buffett and Berkshire’s annual report: 1. Buffett relies on buybacks instead of offers Berkshire repurchased a record $ 24.7 billion of its own share as Buffett struggled to “There’s better ways to invest his enormous amount of cash. And there’s more: the conglomerate has been buying its own shares since the end of last year, and is likely to stick to them,” Buffett said in his annual letter on Saturday. ” That action 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, which pointed out that the company” did not make any significant acquisitions ” in 2020. 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, and Berkshire delivered cash faster than he could find that assets could build up with a higher return, leading to the increase in share buybacks. Apple is as valuable to Berkshire as BNSF Railroad The $ 120 billion investment in Apple Inc. ‘s stake in Berkshire has become so valuable that Buffett places it in the same category as the sprawling railroad business in which he built for a decade. 2016, and spent just $ 31.1 billion to get it all. The increase in value since then, according to the annual letter, places it among the top three assets of the company, along with its insurers and BNSF. The US railroad purchase was completed in 2010. “In some ways, it’s his kind of business,” James Armstrong said. , which manages assets, including Berkshire shares, as president of Henry H. Armstrong Associates. “It’s a 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 an interest in Amazon.com Inc., the cloud computing company Snowflake Inc. and Verizon Communications Inc. built up. Buffett Concedes Error in $ 37.2 billion Deal Buffet 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 primarily linked to Precision Castparts, the manufacturer of aerospace and energy equipment based in Portland, Oregon. The pandemic was the biggest 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. Profit thanks to Railroad, manufacturers Despite the effects of the pandemic that continues to hit 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. railroad BNSF since the 2010 acquisition and one of the best quarters for manufacturing operations since mid-2019. Goodbye Omaha, Hello Los Angeles Berkshire’s annual meeting has drawn many Buffett fans to Omaha, Nebraska, where the conglomerate is based. The annual meeting is moving to the West Coast, though the virtual annual meeting is still being filmed in Los Angeles, the company said Saturday, bringing 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 be asking questions. Buffett and Abel, who live closer to Berkshire headquarters, had a dark arena, 18,000 empty seats and a camera ‘at the annual meeting last year, Buffett said in his letter. The 90-year-old billionaire said he expects to hold a personal meeting in 2022. Visit us at bloomberg.com for more articles like this. © Sign up now to stay ahead of the most trusted business resource. © 2021 Bloomberg LP