Warren Buffett
Gerard Miller | CNBC
Warren Buffett, the 90-year-old “Oracle of Omaha”, continues to firmly believe in the American dream, saying in his closely watched annual letter to shareholders, “Never bet against America”.
“In its brief 232 years of existence … there has been no incubator to unlock human potential like America,” wrote Berkshire Hathaway President and CEO in the letter released on Saturday. “Despite some severe disruptions, our country’s economic progress has been impressive. Our unwavering conclusion: never bet against the United States.”
Buffett shared a fact in the letter to illustrate Berkshire’s American credentials. He said the conglomerate holds the largest amount of US assets (fixed assets) in value than any other company in the country.
“Berkshire’s depreciated cost of these domestic ‘fixed assets’ is $ 154 billion. Next on the list is AT&T, with $ 127 billion in fixed assets,” he wrote.
The billionaire highlighted Berkshire’s two wholly-owned American companies – BNSF Railway and Berkshire Hathaway Energy (BHE) – which made $ 8.3 billion in 2020, despite a drop in demand amid the Covid-19 pandemic.
“Its railroad carries about 15% of all non-local ton-miles (one ton of cargo handled a mile) of goods moving in the United States, whether by train, truck, pipeline, barge or plane,” said Buffett. “The history of the American railways is fascinating. After 150 years or more of frantic construction, cheating, over-construction, bankruptcies, reorganizations and mergers, the railway industry finally emerged a few decades ago as mature and rationalized.”
Buffett believes that BHE will be a leader in providing clean energy in the future. The BHE began a $ 18 billion effort to rework and expand a substantial part of the obsolete grid that now transmits electricity across the west, noted Buffett.
“Unlike railroads, our country’s electricity utilities need a massive overhaul, in which the final costs will be staggering,” said Buffett in the letter. “The effort will absorb all of BHE’s gains in the coming decades. We welcome the challenge and believe that the added investment will be properly rewarded.”
Don’t neglect Central America
Buffett reminded investors that miracles happen in central America, despite much of the attention in coastal areas. After all, the legend started its conglomerate in Omaha, Nebraska, and its head office remains in Cornhusker State.
“Success stories abound across America,” said legendary investors. “Since the birth of our country, individuals with an idea, ambition and often just a trifle of capital have succeeded beyond their dreams, creating something new or improving the customer experience with something old.”
Buffett also made a surprise announcement at his next annual shareholders’ meeting, which will take place in Los Angeles on May 1. It was the first time that the meeting took place outside Omaha. Vice President Charlie Munger, who lives in Los Angeles, missed the 2020 annual meeting due to travel restrictions in the pandemic.
Berkshire bought back about $ 9 billion of its own shares in the fourth quarter of 2020, bringing the company’s total repurchases to $ 24.7 billion by September – a record year for repurchases.
Buffett started hunting for bargains amid the market’s return. He recently took a sizeable position at Chevron, a classic game of value, while adding Verizon and a handful of drug stocks. Apple is still considered the largest investment in the conglomerate’s common stock, which played an important role in offsetting the pandemic damage caused to Berkshire’s railways and insurance in 2020.
The conglomerate is still sitting in a huge cash war chest with more than $ 145 billion at the end of the third quarter. Berkshire put a small portion of the cash pile to work in July, with the purchase of Dominion Energy’s natural gas transmission and storage assets.
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