(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 used his annual letter to investors to ensure that he and his successors would be careful stewards of their money in Berkshire, where “the passage of time” and “inner calm” would help them serve them well.
Despite the disappearance last year of more than 31,000 jobs in the Berkshire workforce, Buffett remained optimistic about the trademark, buying back a record stock of $ 24.7 billion in 2020, in a sign that he considers it undervalued.
He also praised the economy’s ability to withstand “severe disruptions” and enjoy “amazing” progress.
“Our unwavering conclusion: never bet against America,” he said. ((Here))
Tom Russo, a partner at Gardner, Russo & Gardner in Lancaster, Pennsylvania and a longtime investor in Berkshire, said: “He is a deep believer in his company and in the country.”
The letter breaks an unusual silence for Buffett, 90, who has been almost completely invisible to the public since Berkshire’s annual meeting in May last year.
But while addressing familiar issues, including Wall Street bankers’ greed for trading commissions that benefit them more than the companies they represent, Buffett didn’t think about the pandemic, a prime factor behind Berkshire’s job losses.
He also did not address the recent social upheavals or divisive political environment that some companies are now addressing more directly.
“The letter highlighted the innovation and values that have become the backbone of America, and this is perfectly acceptable,” said Cathy Seifert, an analyst at CFRA Research with a rating of “ownership” in Berkshire.
“Given the respect investors have for him, the letter was striking for what he omitted,” she added. “A new generation of investors needs a certain degree of social awareness and that companies like Berkshire have set their own beliefs, standards and goals.”
Buffett also reported a long-term commitment to Apple Inc., where Berkshire closed 2020 with $ 120.4 billion in shares, despite the recent sale of several billion dollars more.
He called Apple and the BNSF railways Berkshire’s most valuable assets – “it’s almost a throw-in” – in addition to its insurance operations and before Berkshire Hathaway Energy. “Family jewelry,” he called the four investments.
PROFIT IS INCREASING EVEN WHERE PLACES ARE LOST
Berkshire also reported net income of $ 35.84 billion in the fourth quarter and $ 42.52 billion for that year on Saturday, both reflecting large gains in its stocks.
Operating income, which Buffett considers a more accurate measure of performance, fell 9 percent for that year to $ 21.92 billion.
Share repurchases continued in 2021, with Berkshire repurchasing over $ 4 billion of its own shares. It ended in 2020 with $ 138.3 billion in cash.
However, Buffett lamented the fixed income as an investment, saying that “bonds are not the right place for these days.” Revenues from a 10-year US Treasury bond fell by 94%, from a yield of 15.8% in September 1981 to 0.93% at the end of 2020. Yields of the benchmark Treasury have since increased, but are still low by historical measures.
“Fixed-income investors around the world – whether they are 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, Geico car insurer, Dairy Queen ice cream and See candy.
The workforce has fallen by 8% from a year earlier to about 360,000 employees. Larger decreases were reported at BNSF, which lost 5,600 jobs, and at See, where employment fell by 16%.
The pandemic hit no business in Berkshire harder than Precision Castparts Corp, which lost 13,473 or 40 percent of its jobs.
Berkshire bought the aircraft and industrial parts maker in 2016 for $ 32.1 billion, Buffett’s largest acquisition, and took a $ 9.8 billion discount as the pandemic decimated the journey and punished Precision aerospace customers.
“I paid too much for the company,” Buffett wrote. “I was just too optimistic about the CCP’s normalized profit potential.
“The CCP is far from my first mistake of this kind,” he said. “But it’s a big one.”
Berkshire said some companies are beginning to recover from the pandemic.
“Certainly 2021 will be a much stronger year, dependent on the speed of vaccinations and the opening up of the US economy,” said Jim Shanahan, an analyst at Edward Jones & Co., with a “buy” rating on Berkshire.
Buffett also said Berkshire’s annual meeting will be held in Los Angeles rather than Omaha, allowing 97-year-old Vice President Charlie Munger, a Californian, to join him and respond at about 3-1. / 2 hours of shareholder questions.
Vice Presidents Greg Abel, 58, and Ajit Jain, 69, who are widely considered leaders in Buffett’s success as chief executive, will also be available to respond to questions.
Buffett said he hopes Berkshire will resume its annual shareholder weekend in Omaha in 2022, which normally attracts about 40,000 people – an “honest annual Berkshire-style meeting with God,” he wrote.
Jonathan Stempel’s report to New York; edited by Megan Davies, Alden Bentley, Marguerita Choy and Cynthia Osterman