Warren Buffett laments the lack of good investment opportunities for Berkshire Hathaway. In his widely read annual letter to Berkshire shareholders, the 91-year-old billionaire expressed great confidence in Berkshire, saying its emphasis on investing in strong companies and stocks benefits investors with a similar long-term focus.
“People who are comfortable with their investments will, on average, achieve better results than those who are motivated by ever-changing headlines, talk, and promises,” Buffett wrote. Looking broadly at the risks of changes in world politics, terrorism and cyber attacks, Berkshire remains cautious.
In 2020 and 2021, it found more value by buying back $51.7 billion of its own shares. Buffett said that “we found little to excite” in the stock market, and that major acquisitions remain elusive after six years without any.
“Today, internal opportunities offer much better returns than acquisitions,” he wrote. Many of those opportunities seemed to pay off in 2021.
Operating profit rose 25% to a record $27.46 billion, with more than a third held by BNSF rail and Berkshire Hathaway Energy despite supply chain disruptions from Covid-19.
Full-year net income more than doubled to a record $89.8 billion, buoyed by gains from Apple, Bank of America, American Express and other stocks in Berkshire’s vast investment portfolio.
Apple’s stake alone totaled $161.2 billion as of December 31, more than five times the $31.1 billion Berkshire paid for it. Share buybacks totaled a record $27 billion in 2021, and Buffett said Omaha, Nebraska-based Berkshire repurchased another $1.2 billion of its shares in 2022.
“It’s offering a story of a multifaceted growth engine,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pa., and a longtime Berkshire investor. “The main message is that Berkshire has found some great deals, So let’s celebrate them.”
In his letter, Buffett touted what he called Berkshire’s “big four,” including its massive insurance operations, BNSF.
“Our goal is to have significant investments in businesses with enduring economic advantages and a world-class CEO,” Buffett wrote. He also said Berkshire favors an “old-fashioned kind of earnings,” including $6 billion last year in its BNSF railroad, casting a shadow over companies that can manipulate their results to boost share prices.
“Misleading earnings ‘adjustments,’ to use a polite description, have become more frequent and more fanciful as stocks rise,” Buffett wrote. “Speaking less politely, I’d say that bull markets breed bull bulls…”
Berkshire ended last year with $146.7 billion in cash and equivalents. Buffett pledged to keep more than $30 billion on hand, having long said $20 billion was the bare minimum.
That’s in part to protect Berkshire against losses at its insurance operations, which include auto insurer Geico and a business that insures against major catastrophes like hurricanes.
The company’s more than 90 operating units also include Dairy Queen ice cream, See’s candy and several industrial companies, including Precision Castparts, an aircraft parts maker hit hard by the pandemic.
Berkshire also said Saturday that it plans for the first time since 2019 to hold its usual shareholders’ weekend in Omaha, including the annual meeting on April 30. “Woodstock for Capitalists,” as Buffett calls the weekend, typically draws about 40,000 people for shopping, dining, a 5K run and other events.
Proof of vaccination against Covid-19 will be required to attend the annual meeting and obtain some discounts on purchases.