Buffett shareholder letter ten points: billions of dollars of cash can not be spent, will open offline shareholder meetings
Warren Buffett’s Berkshire Hathaway (BRKA, BrKA) announced its fourth-quarter and full-year 2021 results on Tuesday evening.Along came buffett’s annual letter to shareholders, his 57th.The world-renowned investor is 91 years old this year.At 12 pages, the latest investment Bible is shorter than in previous years.Thepaper.cn reporters sorted out ten points of interest to see the latest views of the “god of stocks”.After two years at the helm, Berkshire Hathaway is beating the S&P again.Berkshire’s stock rose 29.6% in 2021, its best performance in nearly eight years, beating the S&P 500 by 28.7% by 0.9 percentage point.Over the long term, Berkshire’s market value per share grew at a compound annual rate of 20.1% from 1965 to 2021, significantly outpacing the 10.5% growth of the S&P 500.From 1964 to 2021, Berkshire’s market value increased by an astonishing 36,416 times more than the S&P 500’s 30,209%, or more than 302 times.Berkshire Hathaway also did well in 2021, based on its earnings.For the full year of 2021, Berkshire Hathaway’s operating profit was $27.455 billion, and for 2020 it was $21.922 billion, up 25% from last year.Net income attributable to shareholders was $89.795 billion, up 111% from $42.521 billion a year earlier.Bonus 2: How to improve the intrinsic value of a company’s stock?”We did make reasonable progress in enhancing the intrinsic value of our stock, a task that has been my primary responsibility for 57 years and will remain so.””Buffett wrote at the beginning of his shareholder letter.Buffett says there are three ways to add value.The first has always been a top priority for us: to improve the long-term profitability of Berkshire’s holding businesses through internal growth or acquisition;The second option is to buy a non-controlling interest in many publicly traded good or outstanding companies;The final way to create value is to buy back Berkshire shares.Regardless of the form of ownership, Buffett says the goal is to make meaningful investments in companies with moats and top-notch ceos.”This is crucial: Charlie and I are not picking stocks, we are picking business models and companies.””We own stocks based on our expectations of long-term business performance, not as a trading tool,” Buffett stressed.Buffett doesn’t shy away from praising Apple as a “favorite” in his letter.”Tim Cook, apple’s brilliant CEO, rightly sees apple’s users as his first love, and his other supporters benefit from his management style as well.”Buffett said.Buffett emphasized that only Apple’s dividend is included in Berkshire’s GAAP earnings report.In addition to the $785 million apple paid Berkshire in dividends in 2021, shareholders’ indirect ownership of Apple stock generated a profit of $5.6 billion in 2021, much of which was used to buy back stock, something Buffett has been loudly praising.Buffett also mentioned that the company increased its stake in Apple from 5.39% to 5.55% at the end of 2021, an increase that cost Berkshire nothing and was entirely caused by Apple’s buybacks.Point four:Byd remains the eighth-largest holding as of the end of last year,Berkshire owns Apple ($161.155 billion market cap), Bank of America ($45.952 billion), American Express ($24.804 billion), Coca-Cola ($23.684 billion), Moody’s ($9.636 billion), Verizon ($8.253 billion), and U.S. Bancorp ($80 billion).Byd ($7.693 billion), Chevron ($4.488 billion), Bank of New York Mellon ($3.882 billion), Itochu Corporation ($2.728 billion), Mitsubishi Corporation ($2.593 billion), Charter Communications ($2.496 billion)Yuan) and Mitsui Group (market cap: $2.219 billion).Notably, its Holding in Chinese company BYD is in eighth place, with a market capitalization of nearly $7.7 billion, or 7.7%, down slightly from 8.2% a year earlier.It is the only Chinese stock Buffett currently owns.In September 2008, Mr. Buffett bought byd at Mr. Munger’s recommendation at HK $8 a share, paying HK $1.8 billion for 225 million shares, an 8.25% stake.This investment, Buffett has not made any adjustment, has been held to this day.Buffett noted that BYD is owned by its subsidiary BHE (Berkshire Hathaway Energy).As a result, Berkshire shareholders hold only 91.1 per cent of the position.Buffett devoted much of his letter to the “big Four,” which account for most of Berkshire’s value.Top of the list is Berkshire’s insurance business.When it comes to insurance, Buffett said the business is tailor-made for Berkshire, arguing that products never go out of style and that revenue generally increases with economic growth and inflation.Apple ranked second by year-end market value.BNSF’s rail business and BHE’s energy business came in third and fourth place respectively.BNSF achieved record earnings of $6 billion in 2021.Bhe also made a total record profit of $4 billion in 2021, a more than 30-fold increase from the $122 million Berkshire first acquired in 2000.”Bhe has become a utility giant, a dominant force in wind, solar and transmission across much of the COUNTRY.””You’ll find it’s definitely not the ‘greenwashing’ story that’s popular today,” Buffett said.In his shareholder letter, Buffett continued to express his love for America.Berkshire owns and operates more US “infrastructure” assets — classified as real estate, plant and equipment on its balance sheet — than any other US company, Mr Buffett said.Those infrastructure assets were worth $158 billion on Berkshire’s balance sheet at the end of 2021.”This number will continue to increase.Because Berkshire keeps getting bigger.”Berkshire paid a total of $3.3 billion in federal income taxes in 2021, in addition to a large amount of state and foreign taxes.”Berkshire now pays about $9 million a day to the Treasury.”Buffett said.”It is fair to say that our shareholders should acknowledge, and indeed trumpet, Berkshire’s prosperity as a result of its operations in the United States.Without Berkshire, our country would have done very well in the years after 1965.However, Berkshire would never be what it is today without our home in the United States.”Buffett used Berkshire’s experience to reiterate that you should never bet against the United States.Sure, Buffett, who wants to spend money every year, still hasn’t done so in 2021.Berkshire ended 2021 with $144bn in cash and equivalents, of which $120bn was in Treasuries, all maturing within a year.”Charlie [Buffett’s partner Charlie Munger] and I have agreed that Berkshire (and our subsidiaries other than BNSF and BHE) will always hold more than $30 billion in cash and equivalents.We want companies to be financially impregnable and never to rely on the kindness of strangers (or even friends).We both like to sleep well, and we want our creditors, insurance claimants and you to sleep well, too.”Buffett said.Still, he doesn’t really like holding so much cash and cash equivalents.”I assure you, this large sum is not an act of patriotism gone mad.”Mr. Buffett wrote that his preference for owning a business hasn’t changed since he first bought shares on March 11, 1942.Berkshire’s current holding level is largely flat at around 80% because it can’t find a company (or a piece of a stake) that meets Berkshire’s criteria.”Charlie and I have endured similar periods of heavy cash positions from time to time in the past, and these periods were never pleasant or permanent.”As far as Buffett is concerned, they’ve found little to get excited about.So how do the stock gods use as much cash as possible?The answer is buybacks.In the fourth quarter of 2021, Berkshire repurchased $6.9 billion of its shares, bringing the total to about $27 billion last year, another record.Berkshire just set a full-year record of $24.7 billion in repurchases in 2020.Nearly two months into 2022, Berkshire spent another $1.2 billion on buybacks as of Feb. 23.”Over the past two years, we have repurchased 9 percent of our external shares outstanding as of the end of 2019 at a total cost of $51.7 billion.This payout enables our long-term shareholders to own approximately 10% more of all Berkshire businesses, whether they are wholly owned (as in BNSF and Geico) or partially owned (as in Coca-Cola and Moody’s).””Buffett wrote.In Buffett’s view, the buyback increases shareholders’ share of Berkshire’s many controlling and non-controlling businesses.”When prices are cheap relative to value, it is the simplest and most certain way for our shareholders to increase their wealth.(In addition to increasing value for continuing shareholders, there are gains for several other parties: the buyback has some benefits for both the seller and society.)Mr Buffett stressed that for Berkshire’s share buybacks to be meaningful, shares had to be offered at the right price.”We don’t want to overpay for other companies’ stock, so it’s not worth it if we overpay for Berkshire stock.””Our appetite is still strong, but it always depends on price.”Buffett said.Admittedly, Berkshire’s buyback opportunities are limited “because it has high-quality investors”.Buffett explained that if Berkshire’s shares were heavily owned by short-term speculators, price swings and trading volumes would be much greater, potentially creating more valuable buyback opportunities for him and allowing long-term shareholders to profit from speculative buybacks.But it is clear that many fans of Berkshire’s stock have embraced it as a family heirloom.One thing that has excited investors around the world is that, after two years of going online, Warren Buffett’s highly anticipated shareholder meeting is finally going offline.Buffett announced in his shareholder letter that Berkshire will hold its annual meeting in Omaha from Friday, April 29, to Sunday, May 1.Every May, tens of thousands of investors flock to the small town of Omaha, Nebraska, to hear Berkshire CEO Warren Buffett and Vice Chairman Charlie Munger weigh in on the company’s businesses and investments.However, due to the COVID-19 pandemic, the 2020 and 2021 shareholders’ meetings will be held online.According to the agenda announced in the shareholders’ letter, attendance at the shareholders’ meeting requires proof of COVID-19 vaccination.The conference will begin at 8:30 a.m. Eastern time on April 29, with a q&A session at 9:15 a.m.Q&a will continue after a short lunch break from 1pm to 3.30pm.Buffett, Munger and two deputies, Gregg and Ajit, will answer questions at the meeting.A traditional shopping day and a 5km run were also scheduled during the shareholders’ meeting.Of particular interest is a letter to shareholders, signed by Gregory Abel, that appears in the appendix to Berkshire’s 2021 annual report describing Berkshire’s sustainability efforts.And in buffett’s shareholder letter at the beginning of the annual report, readers are specifically reminded to read the appendix.It is the first time a letter signed by someone other than Buffett has appeared in Berkshire’s annual report.So, who is Abel?In an interview with CNBC on May 3, 2021, Buffett admitted: “The board unanimously agreed that Greg Abel, the vice chairman of Berkshire’s non-insurance businesses, would take over as CEO if I stepped down.”Buffett admitted that Berkshire’s board had reached a consensus on who should take over as CEO immediately: “If anything happened to me tonight, Greg would take over as CEO the next morning.If anything happens to Greg, ajit, the other vice chairman, takes over.”In January 2018, Buffett promoted two executives — Greg Abel and Ajit Jain — to Berkshire’s board.Abel was named vice chairman of Berkshire’s non-insurance business, while Jean became vice chairman of the insurance business.Mr Buffett said at the time that the appointment was “part of a succession process”, so they are seen as future successors to Mr Buffett and Mr Munger.Both men have long been speculated to be contenders for the TOP job at Berkshire.Until 2020, When Munger was unable to attend Berkshire shareholders’ meeting due to travel restrictions due to the epidemic, Abel took munger’s place and was widely expected to become Buffett’s successor.