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Buffett is bullish in the US and Berkshire, buying back stocks even if a pandemic breaks out

© Reuters. FILE PHOTO: Berkshire Hathaway chairman Warren Buffett walks through the exhibition hall as shareholders gather to hear from the billionaire at Berkshire Hathaway Inc’s annual general meeting in Omaha


From Jonathan stamp

(Reuters) – Even the coronavirus pandemic did not dampen Warren Buffett’s excitement about the future of America and its company Berkshire Hathaway Inc. . (NYSE 🙂

Buffett used his annual letter to investors to ensure that he and his successors would be careful stewards of their money, where “the passage of time, peace of mind, extensive diversification, and minimization of transactions and fees” served them well would.

He also maintained his trademark optimism for Berkshire, buying back a record $ 24.7 billion in 2020, which he believes is undervalued and the economy’s ability to endure “severe disruptions” and make “breathtaking” strides .

“Our unshakable conclusion: never bet against America,” he said. ((https://www.berkshirehathaway.com/letters/2020ltr.pdf))

The letter breaks an unusual silence for the 90-year-old Buffett, who has been almost invisible to the public since Berkshire’s annual meeting last May.

“He has a strong belief in his company and the country,” said Tom Russo, a partner at Gardner, Russo & Gardner in Lancaster, Pennsylvania and a longtime investor in Berkshire.

However, Buffett’s letter also made no specific mention of the coronavirus pandemic, a major factor behind the loss of more than 31,000 jobs in Berkshire’s workforce last year or the recent social upheaval and division policies that some companies are now addressing more directly.

“The letter highlighted the innovations and values ​​that have become America’s backbone, and that is perfectly acceptable,” said Cathy Seifert, an analyst at CFRA Research with a “Hold” rating for Berkshire.

“Given the awe investors show him, the letter caught the eye of what he left out,” she added. “A new generation of investors requires a certain level of social awareness and that companies like Berkshire state their beliefs, standards and goals.”

Buffett also signaled a long-term commitment to Apple Inc (NASDAQ 🙂 by labeling Berkshire’s $ 120.4 billion stake and ownership of the BNSF railroad as his most valuable asset after his insurance deals – “it’s pretty much a mistake “.

Profit increases even if jobs are lost

Berkshire also reported net earnings of $ 35.84 billion for the fourth quarter and $ 42.52 billion for the year on Saturday, both of which were due to big gains in its stock holdings.

Operating income, which Buffett considers a more accurate measure of performance, declined 9% to $ 21.92 billion over the year.

Share buybacks continued into 2021, and Berkshire bought back more than $ 4 billion of its own shares. It ended 2020 with $ 138.3 billion in cash.

Berkshire has more than 90 operating units, including the BNSF railroad, Geico auto insurer, Dairy Queen ice cream, Bonbons von See, and the energy and real estate brokerage companies of the same name.

The workforce fell by 8% to around 360,000 compared to the previous year. Larger declines were reported at the BNSF, which cut 5,600 jobs, and at See’s, where employment fell by 16%.

The pandemic hit no Berkshire company harder than Precision Castparts Corp., which cut 13,473, or 40% of its jobs.

Berkshire bought the aircraft and industrial parts maker for $ 32.1 billion, Buffett’s largest acquisition, in 2016, and took a $ 9.8 billion write-down as the pandemic decimated travel and air and traffic Precision space customers fined.

“I paid too much for the company,” wrote Buffett. “I was just too optimistic about PCC’s normalized profit potential.

“PCC is a far cry from my first mistake of its kind,” he said. “But it’s a big one.”

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 up of the US economy,” said Jim Shanahan, an Edward Jones & Co analyst with a “Buy” rating for Berkshire.

Buffett also said that Berkshire’s annual meeting will be held in Los Angeles rather than Omaha so that 97-year-old vice chairman Charlie Munger, a Californian, can join him in answering about three and a half hours of shareholder questions.

Vice-Chairs Greg Abel, 58, and Ajit Jain, 69, who are widely recognized as trailblazers for Buffett’s successor as CEO, are also available to answer questions.


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