Buffett calls on investors not to bet against US

Billionaire Warren Buffett encouraged investors to maintain their faith in America’s economy and the businesses his Berkshire Hathaway conglomerate owns in a reassuring letter to his shareholders yesterday.

Buffett hardly even addressed the coronavirus that ravaged many businesses last year, instead focusing on the long-term prospects for the railroad, utility and insurance businesses and stocks that belong to Berkshire Hathaway. But he said United States business will thrive over time in spite of the pandemic.

“In its brief 232 years of existence, however, there has been no incubator for unleashing human potential like America. Despite some severe interruptions, our country’s economic progress has been breathtaking,” he wrote.

Buffett’s annual letter is always well read in the business world because of his remarkably successful track record and his knack for explaining complicated subjects in simple terms.

But he didn’t offer much explanation for why Berkshire hasn’t made a major acquisition in several years or discuss the firm’s recent major new investments in Verizon Communications and Chevron, leaving many investors wanting more.

“The one thing that caught my eye about the letter was sort of what it didn’t have,” CFRA Research analyst Cathy Seifert said. “I think what was notable was the fact that given everything that’s gone on in this country from the pandemic to all the social unrest to the social inflation and climate change that’s impacting the insurance industry. It was striking to me that none of that was mentioned in the letter.”

Buffett, a long-time Democrat, largely avoided politics in the letter but he did express faith in the future of the country.

“We retain our constitutional aspiration of becoming ‘a more perfect union.’ Progress on that front has been slow, uneven and often discouraging. We have, however, moved forward and will continue to do so. Our unwavering conclusion: Never bet against America,” he said.

Buffett said Berkshire’s US$120-billion stake in Apple is one of its most valuable assets — rivaling its BNSF railroad and Berkshire’s utility division — even though it owns only 5.4 percent of the iPhone maker, hinting at a long-term commitment to the Apple investment.

Fourth-quarter profits

Buffett said one of his biggest investments last year was the US$25-billion repurchase of Berkshire’s own shares. But even after that and several multibillion-dollar stock market investments in the second half of last year, Berkshire still held US$138.3 billion cash at the end of 2020. Edward Jones analyst Jim Shanahan said it’s significant that Buffett is investing that much in his own stock.

In addition to the letter, Berkshire said its fourth-quarter profits grew 23 percent to US$35.8 billion, or US$23,015 per Class A share, even though the pandemic continued to weigh on most of its businesses, which include BNSF railroad, several major utilities, Geico insurance and an assortment of manufacturers and retailers. Most of the gain over last year’s US$29.2 billion, or US$17,909 per A share, was related to paper gains on the value of its investments.

Buffett maintains that Berkshire’s operating earnings offer a better view of quarterly performance because they exclude investments and derivatives, which can vary widely. By that measure, Berkshire’s operating earnings increased by nearly 14 percent, to US$5.02 billion, or US$3,224.74 per Class A share. That’s up from US$4.42 billion, or US$2,714.76 per Class A share, a year earlier.