OMAHA, Neb. — Warren Buffett credited his former partner, the late Charlie Munger, with being the architect of the Berkshire Hathaway conglomerate, whose leadership he welcomed, and warned shareholders in his annual letter Saturday not to listen to Wall Street experts and financial advisors who urge them to negotiate. often.
Buffett said he always writes his letter with smart, long-term investors like his sister Bertie in mind and tries to tell them what he thinks they would like to know about Berkshire.
“She is sensible, very sensible, and knows instinctively to always ignore the experts,” Buffett wrote of Bertie. “After all, if she could reliably predict tomorrow’s winners, would she freely share her valuable knowledge and thus increase competitive purchasing? “It would be like finding gold and then giving a map to the neighbors showing its location.”
Buffett told investors that Berkshire is a safe place to park their cash as long as they don’t expect the “surprising performance” of its past because there are no attractively priced acquisition targets large enough to make a significant difference in the market. . Results from the Omaha, Nebraska-based company. But he said Berkshire will be ready to pounce with its $167.6 billion whenever the casino-like stock market grinds to a halt.
Munger, Buffett’s longtime investment partner, died in November at age 99, removing one of the key sounding boards Buffett relied on for decades as Berkshire acquired companies like See’s Candy, Geico Insurance, BNSF Railroad and others. to remodel the failed textile mill he took over in the 1960s into the huge eclectic conglomerate Berkshire is today.
Buffett already dedicated part of last year’s annual letter to Berkshire shareholders to a tribute to Munger, but this year’s version began with even more praise for the revered curmudgeon’s contributions to Berkshire over the years. Buffett said that “Charlie was the ‘architect’ of today’s Berkshire” who realized early on that it was better to buy wonderful businesses at fair prices.
“Charlie never sought to take credit for his role as creator, but instead let me do the bowing and receive the praise,” Buffett wrote. “In a way, his relationship with me was part big brother and part loving father. Even when he knew he was right, he gave me the reins, and when I made a mistake, he never – ever – reminded me of my mistake.”
Buffett also told how Berkshire’s insurance businesses, such as Geico, prospered last year, but its huge utilities and BNSF railroad disappointed. He also told shareholders that he never plans to sell his stakes in nearly 30% of Occidental Petroleum and 9% of five major Japanese trading houses, but reiterated that he has no plans to buy the oil producer directly.
Berkshire’s eclectic mix of businesses, combined with strong investment performance, generated a profit of $37.57 billion, or $26,043 per Class A share, in the fourth quarter. That’s more than double the $18.08 billion profit, or $12,355 per Class A share, that Berkshire reported a year earlier.
But Buffett cautioned that investors should largely ignore those final numbers because they are so influenced by the paper value of their investments. Instead, he has long urged investors to pay attention to Berkshire’s operating profits that exclude investments.
By that measure, Berkshire reported a 28% increase in operating profit to $8.48 billion, or $5,878.21 per Class A share. That’s up from $6.63 billion, or $4,527.06 per share. A class.
All three analysts surveyed by FactSet Research predicted Berkshire would report quarterly operating earnings of $5,717.17 per Class A share.
Berkshire shares have set a series of new records in recent weeks, most recently hitting a high of $632,820 per Class A share on Friday morning, as investors anxiously awaited Buffett’s letter. Buffett is revered for his remarkably successful track record and the sage advice he has offered over the decades. His annual letter is always one of the most read reports in the business world.
Berkshire also spent $2.2 billion buying back its own shares in the fourth quarter, bringing the total to $9.2 billion for the full year.
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