(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 managers of their money in Berkshire, where “the passage of time” and “an inner calm” would help to serve them well.
Despite the disappearance of more than 31,000 jobs from Berkshire’s workforce last year, Buffett maintained his trademark optimism, repurchasing a record $ 24.7 billion of his shares in 2020 in a signal he considers undervalued.
He also praised the economy’s ability to withstand “severe interruptions” and enjoy “breathtaking” progress.
“Our unwavering conclusion: never bet against America,” he said. ((on here))
Tom Russo, a partner at Gardner, Russo & Gardner in Lancaster, Pennsylvania and a longtime investor at Berkshire, said: “He deeply believes in his company and 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 last May.
But while he touched on familiar topics, including the avarice of Wall Street bankers for negotiation fees that benefit them more than the companies they represent, Buffett was not concerned with the pandemic, a major factor behind Berkshire’s job losses.
Nor did he address the recent social upheavals or the dividing political environment that some companies now address more directly.
“The letter highlighted the innovation and values that have become America’s backbone, and that is perfectly acceptable,” said Cathy Seifert, CFRA Research analyst with a hold rating at Berkshire.
“Given the reverence that investors have for him, the letter was impressive for what was omitted,” she added. “A new generation of investors requires a certain degree of social awareness and that companies like Berkshire establish their beliefs, standards and goals.”
Buffett also signaled a long-term commitment to Apple Inc, where Berkshire ended 2020 with $ 120.4 billion in shares, despite having recently sold several billion dollars more.
He called Apple and the BNSF railroad Berkshire’s most valuable assets – “it’s practically a bid up” – in addition to its insurance operations, and ahead of Berkshire Hathaway Energy. “The family jewels”, he called these four investments.
PROFIT INCREASES EVEN WHEN JOBS ARE LOST
Berkshire also reported a net profit of $ 35.84 billion in the fourth quarter and $ 42.52 billion for the year on Saturday, both reflecting large gains in its shares.
Operating income, which Buffett considers a more accurate measure of performance, fell 9% in the year, to $ 21.92 billion.
Share buybacks continued into 2021, with Berkshire repurchasing more than $ 4 billion of its own shares. It ended 2020 with $ 138.3 billion in cash.
However, Buffett lamented fixed income as an investment, saying that “bonds are not the place to be today”. Revenue from a 10-year United States Treasury bond fell 94%, from a yield of 15.8% in September 1981 to 0.93% at the end of 2020. Treasury benchmark yields have since increased, but are still down by historical measures.
“Fixed income investors around the world – whether pension funds, insurance companies or retirees – face a bleak future,” the letter said.
Berkshire, based in Omaha, Nebraska, has more than 90 operating units, including the BNSF railroad, auto insurance company Geico, Dairy Queen ice cream and See’s candy.
Its workforce decreased 8% from the previous year, to around 360,000 employees. Larger declines were reported at BNSF, which eliminated 5,600 jobs, and at See’s, where employment fell 16%.
The pandemic did not hit Berkshire’s business more strongly than Precision Castparts Corp, which eliminated 13,473, or 40%, of its jobs.
Berkshire bought the aircraft and industrial parts maker in 2016 for $ 32.1 billion, Buffett’s biggest acquisition, and suffered a $ 9.8 billion write-off when the pandemic decimated travel and punished Precision’s aerospace customers.
“I paid a lot for the company,” wrote Buffett. “I was too optimistic about the PCC’s normalized profit potential.
“The CCP is far from my first such mistake,” he said. “But it is a big problem.”
Berkshire said some companies are starting to recover from the pandemic.
“Certainly 2021 will be a much stronger year, depending on the speed of vaccinations and the opening of the US economy,” said Jim Shanahan, an analyst at Edward Jones & Co with a “buy” rating at Berkshire.
Buffett also said that Berkshire’s annual meeting will be held in Los Angeles, not Omaha, allowing Vice President Charlie Munger, a 97-year-old Californian, to rejoin him and respond about 3-1 / 2 hours of questions from shareholders.
Vice-presidents Greg Abel, 58, and Ajit Jain, 69, who are widely considered to be pioneers in Buffett’s succession as chief executive, will also be available to answer questions.
Buffett said he expected Berkshire to resume its annual shareholder weekend in Omaha in 2022, which usually attracts about 40,000 people – an “annual honest meeting with God, in the style of Berkshire,” he wrote.
Jonathan Stempel reporting in New York; edition of Megan Davies, Alden Bentley, Marguerita Choy and Cynthia Osterman