By Katherine Chiglinsky
Warren Buffett’s 15-page annual letter to shareholders on Saturday highlighted the pandemic that hit the globe in 2020 just once: One of its furniture companies had to close for a time because of the virus , the billionaire noted on page nine.
Buffett similarly steered clear from politics, despite the controversial and controversial presidential election at the U.S. Capitol, and never encountered race or inequality even after protests and unrest going out in cities across the country last year. He also avoided succumbing to the competitive pressures of making contracts that faced his rival, Berkshire Hathaway Inc., a topic that often spread in the letters of the year. gone.
“Here you have a company with such an honorable and well-respected leader – who has an important opinion, whose businesses are affected by the pandemics, insurance companies affected by global warming and social inflation – and there was an impact not a single word about the pandemic, ”Cathy Seifert, an analyst at CFRA Research, said in a telephone interview. “That was amazing to me. He was deaf and frustrated. ”
Buffett, 90, has been remarkably quiet since last year’s annual meeting in May amid a number of cases facing Americans. His annual letters are often seen as an opportunity to help investors understand his thinking on broad topics and market trends, as well as details on how his combination is fishing. .
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But the Berkshire chief executive is cautiously measuring his words, and some topics, such as the pandemic, are in danger of entering a highly controversial political arena, said Jim Shanahan, an analyst at Edward D. Jones & Co., in an interview.
“There have been many comments about the pandemic and the impact on the industries, but without saying something in the letter, I think it’s a way of trying to avoid something that would be seen as a political statement, which he has been less willing to do in recent years, ”said Shanahan.
A representative for Buffett did not immediately respond to a request for comment submitted outside normal office hours.
Buffett also remained silent on issues fundamental to his conglomerate, such as the market environment amid a turbulent year – and the work of major investment agents such as Todd Combs and Ted Weschler, according to Cole Smead, which owns Smead Capital Management. monitoring investments in Berkshire.
“There’s more to be had from what’s not in the letter,” said Smead, the company’s president and portfolio manager. “I think again and again in this letter that it was a sin of neglect.”
Here are other key takeaways from Buffett’s letter and Berkshire’s annual report:
1. Buffett relies on repurchases instead of offers
Berkshire bought $ 24.7 billion higher than its own stock as Buffett struggled to find better ways to invest his huge sum of money.
And there’s more of where that came from: The conglomerate has continued to buy its own stock since the end of last year, and is likely to continue to do so, Buffett said Saturday in its annual letter.
“That action increased your investment in all businesses in Berkshire by 5.2% without requiring you to touch your wallet so much,” Buffett said in the letter, which showed that ‘any major property’ company in 2020.
Berkshire made some progress in parking the currency, which fell 5% in the fourth quarter to $ 138.3 billion. Buffett has struggled to keep up with the flow in recent years as Berkshire threw out money faster than it could find higher-return assets. , leading to an increase in share repurchases.
2. Apple is just as valuable to Berkshire as BNSF Railroad
Apple Inc. has a $ 120 billion investment in Apple Inc. stock. has become so valuable that Buffett puts it in the same category as the sprawling railroad industry he spent a decade building.
It started raising interest in iPhone maker in 2016, and cost just $ 31.1 billion to get it all. The rise in value since then is being included among the company’s three main assets, along with its insurers and BNSF, a U.S. rail purchase that was completed in 2010, according to the annual letter.
“In a way, this is the kind of business he has,” said James Armstrong, who manages assets involving Berkshire shares as president of Henry H. Armstrong Associates. “It’s very much a brand name, it’s global, it’s very addictive.”
Buffett had always invested in technology, saying he did not understand the companies enough. But rising agents including Combs and Weschler have brought Berkshire into the division. In addition to Apple, the conglomerate has built stakes in Amazon.com Inc., cloud computing company Snowflake Inc., and Verizon Communications Inc.
3. Buffett admits error in $ 37.2 Billion Deal
Buffett admitted 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 billion-dollar investor said Saturday in its annual letter. “Nobody deceived me in any way – I was just overly optimistic about PCC’s normal profitability.”
Berkshire seized nearly $ 11 billion last year that was largely tied to Precision Castparts, the equipment maker for the aerospace and energy industries based in Portland, Oregon.
The pandemic was the main culprit. Precision Castparts struggled with falling demand for flights, forcing airlines to park their jets and cut their records. Fewer flights mean lower demand for new parts and new flights. Precision laid down its workforce by about 40% last year, according to Berkshire’s annual report.
4. Profit Profits Thanks to Railroad, Manufacturers
Despite the effects of the pandemic continuing to hit Berkshire’s business base, the conglomerate posted a nearly 14% gain in operating earnings in the fourth quarter compared to the same period a year earlier.
That was helped by the highest quarter for rail BNSF since its purchase in 2010 and one of the best quarters for manufacturing operations since mid-2019.
5. Good-bye Omaha, Hello Los Angeles
Berkshire’s annual meeting for years has drawn Buffett fans to Omaha, Nebraska, where the conglomerate is based. This year, the show is moving to the West Coast.
While they remain significant due to the pandemic, the annual general meeting will be filmed in Los Angeles, the company said Saturday.
That brings the event closer to the home of Buffett’s long-time business partner Charlie Munger. Buffett and Munger will be joined by two leading producers, Greg Abel and Ajit Jain, who will also be raising questions.
Last year Buffett and Abel, who live closer to Berkshire’s headquarters, faced a “dark area, 18,000 empty seats and a camera” at the AGM, Buffett said in his letter. The 90-year-old billionaire has said he plans to hold a meeting in person in 2022.