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Letter from Buffett to break months of silence amid uproar in the United States
(Bloomberg) – As 2020 raged on, Warren Buffett mostly held his tongue as he remained silent during a rocky presidential election, a racial judgment that sparked nationwide protests and an exuberance for actions that gripped millions of Americans. Not to mention a global pandemic. Now, the billionaire CEO of Berkshire Hathaway Inc. has a chance to break his silence with the publication of his annual letter on Saturday: “If this letter doesn’t solve some of the problems, people are going to be disappointed,” Cathy Seifert, an analyst at CFRA Research, said in a telephone interview. “There is an appetite for his thoughts.” The letter is an annual tradition for the 90-year-old CEO, a chance to share his wisdom with his loyal valued investors. And Buffett usually doesn’t hesitate to share that wisdom, even when campaigning in the past for controversial politicians, including Hillary Clinton. His annual missive ahead of the 2016 presidential election addressed politics, berating the candidates’ negative drumbeat. considering the “worst cases” of the possibilities of the Covid-19 pandemic. The CEO has since shared few, if any, of his views, even last year as President Joe Biden and former President Donald Trump faced off in one of the most controversial elections in the world. history of the United States. The 2020 letter made no mention of the subject. “Maybe he just decided there was no advantage in going into this fray,” Seifert said. “He was a little more open when the level of general speech was much more civil, and I can certainly understand a desire to clean up your tent and go home without participating. It is no longer a board game. It is a bloodthirsty sport. Long list If he decides to speak, there are plenty of topics he could talk about. How did he see the riot at the United States Capitol in early January? What did he say to Biden during his conversation just weeks before the election? What should investors think about the recent drama involving GameStop Corp’s short sellers? and other actions? What about the booming stock market? And how should businesses tackle racial inequalities? His business partner, Charlie Munger, was not shy about talking about stock speculation Wednesday at the annual meeting of the Daily Journal Corp., of which he is chairman. He criticized brokers such as Robinhood Markets Inc., saying they basically offer gambling services – a “dirty way” of making money. There are also more overwhelming questions for Buffett. Although he easily beat the S&P 500 for more than 50 years at the helm of Berkshire, Buffett has underperformed the index for at least a decade. And his cautious stance last May at Berkshire’s annual meeting drew questions from some who wanted him to be more aggressive in making new investments. Fort Knox Balance Sheet. ”“ The fact that he was more cautious was perfectly fine, ”said Pollock, portfolio manager at Cheviot Value Management LLC, which counts Berkshire as its largest stake. “Better to miss an opportunity and stay in a great financial position than to take a big swing, and swing and miss and hit.” Berkshire is also plagued by its size. The company has grown so much that only massive acquisitions can make a difference. But they have been hard to find amid high prices and competition from buyers such as private equity firms. Even the company’s $ 6 billion in purchases of Japanese shares last year would only represent 4% of Berkshire’s cash at the end of the third quarter. Now, Buffett can add the recent boom in PSPCs, or special purpose acquisition companies, as another competitor swamping the trading space. “There is so much going on right now that I think the market would benefit from, in terms of wisdom,” Jim Shanahan, an analyst at Edward D. Jones & Co., said in a phone interview. He listed the rise of PSPC as well as “GameStop, Short Selling, Reddit and the whole episode.” But even just things like the stock’s underperformance, inflation, stimulus – size, and maybe the need for another stimulus. It’s a long list. While Buffett has given no indication of his resignation anytime soon, investors are still looking for clues as to how the nonagenarian is doing, and he often uses the letter to joke and reassure investors. Last year Buffett said he and Berkshire Vice President Munger, 97, had long since entered the ‘urgent zone’ in terms of age. But he tried to reassure investors that the company is well prepared for the pair’s departure. In fact, the future of the company has been wired for some time now. Buffett elevated Greg Abel and Ajit Jain to vice presidents in 2018, promotions that have been called “part of the succession movement.” He promised to give the pair more of a platform to answer questions at last year’s annual meeting, but that changed when Covid-19 forced the meeting into a virtual format and limited attendance. to Buffett and Abel, who lives closer to Omaha, Nebraska, where Berkshire is based. MPs, Todd Combs and Ted Weschler. One of them was the key to Berkshire’s Apple Inc. bet, which now ranks as the company’s biggest common stock investment, but the company doesn’t typically say which executive is responsible for a particular investment. . It is known, however, that Combs and Weschler have pushed Berkshire into more tech-driven opportunities, such as its recent investment in cloud computing company Snowflake Inc. All MoneyBuffets have been blessed in recent years with one high-class problem: too much money. ‘silver . Berkshire continues to attract more funds than its CEO can quickly deploy into higher-yielding assets, resulting in a cash stack that surpassed $ 145 billion at the end of September. Buffett was still active last year to deploy funds. Berkshire ventured to Japan by recovering the shares of various trading companies. The company also bought natural gas assets from Dominion Energy Inc. And recently, Berkshire has spent months building up an estimated $ 4.1 billion stake in Chevron Corp. and an $ 8.6 billion stake in Verizon Communications Inc. What Bloomberg Intelligence Says: “We believe the record 2020 share buyback reflects a dearth of other options and Buffett’s conservatism in this time of year. uncertainty. The company would need a big deal to drive results forward. – Matthew Palazola, senior analyst The Chevron and Verizon bets are more lucrative ways for Berkshire to park some of its cash instead of holding more Treasuries, according to Pollock. Chevron and Verizon now rank in the top three bets on Berkshire common stock with the highest dividend yield, according to data compiled by Bloomberg. Still, Buffett is sticking largely to familiar areas. Berkshire is familiar with the energy space, and had previously bet on Verizon. One of his biggest purchases last year was for the conglomerate’s own turf: the purchase of Berkshire shares. It cost around $ 15.7 billion in the first nine months of 2020, already making it a banner year for buyouts. There are signs of even more buybacks in the fourth quarter, with a record indicating that it bought back enough shares in late October to bring the annual total to at least $ 18 billion. “If he had made an $ 18 billion acquisition, we would have called it significant. Edward Jones’ Shanahan said. The total buybacks from last year to the end of October are “very large”, although the company is limited in the amount it can buy back due to the lack of liquidity in Berkshire shares, according to Shanahan. thoughts on the coronavirus in China. The pandemic would continue to sweep across the United States and the rest of the world, crushing stocks in March and early April. Buffett, who has told investors to be greedy when others are afraid, has remained unusually cautious during these early years. months, even abandoning the airlines. and claiming that the world has changed for this industry, US stocks rebounded widely in the closing months of 2020, and soared again early this year with the Reddit-induced mania around certain stocks such as GameStop. Buffett’s loyal investors might want to know what he thinks about the recent market turmoil, depending on whether he wrote this year’s letter before or after the phenomenon emerged. , when Buffett ridiculed some investors’ understanding of the market in a way that he could easily resurrect 20 years later: “It was like a virus,” Buffett wrote in his annual letter published that year, ” racing among investment professionals as well as amateurs, have caused hallucinations in which the values of stocks in certain sectors have been decoupled from the values of the companies that underlie them. For more articles like this, please visit us at bloomberg.com. © 2021 Bloomberg LP
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