Warren Buffett on February 24 moved to reassure investors that his conglomerate Berkshire Hathaway would serve them nicely over the long run, at the same time as he mourned the latest passing of his longtime second-in-command Charlie Munger.
In his widely-read annual letter to Berkshire shareholders, which accompanied a document $37.4 billion full-year working revenue, Mr. Buffett mentioned his greater than $900 billion conglomerate has turn out to be a fortress able to withstanding even an unprecedented monetary catastrophe. “Berkshire is built to last,” he wrote.
Mr. Buffett additionally tempered expectations for Berkshire’s inventory value, saying the corporate’s big dimension left “no possibility of eye-popping performance.”
“There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others,” Mr. Buffett wrote. “Some we can value; some we can’t.”
But the 93-year-old billionaire additionally assured investors that Vice Chairman Greg Abel, his designated successor, was “in all respects ready to be CEO of Berkshire tomorrow.”
Charlie Munger was the “architect” of Berkshire, says Buffett
Mr. Buffett additionally saved his most heartfelt phrases for Mr. Munger, who died in November at age 99. He known as Mr. Munger the “architect” of Berkshire, with Mr. Buffett being solely the “general contractor,” and reminded investors how Mr. Munger pushed him to purchase great companies at honest costs as an alternative of honest companies at great costs.
Berkshire’s “extreme fiscal conservatism,” together with reluctance to make main acquisitions at inflated costs, is one purpose Mr. Buffett has let the Omaha, Nebraska-based firm’s money stake swell to a document $167.6 billion.
“In a way his relationship with me was part older brother, part loving father,” Mr. Buffett wrote, referring to Mr. Munger. “Even when he knew he was right, he gave me the reins, and when I blundered he never–never–reminded me of my mistake.”
Cathy Seifert, a CFRA Research analyst who charges Berkshire “buy,” mentioned Mr. Buffett tried to present how Berkshire may stand up to rocky shoals, even after Mr. Munger helped him remodel a once-failing textile firm right into a colossus mirroring the broader financial system.
“Nothing is perfect,” she mentioned. “He tried to show there is a succession plan, and Berkshire would stick to its knitting.”
Mr. Buffett likened Berkshire’s warning in making acquisitions, with the inventory market now routinely setting document highs, to an insurance coverage coverage in opposition to the type of hurried, unwise enterprise selections that will have irked Mr. Munger.
“I have a sense that Berkshire wants to make Charlie proud,” mentioned Thomas Russo, a portfolio supervisor and longtime shareholder at Gardner, Russo & Quinn in Lancaster, Pennsylvania.
Berkshireâs outcomes
Mr. Buffettâs letter was accompanied by the companyâs quarterly and annual outcomes.
Operating revenue from its dozens of insurance coverage, railroad, industrial, power, and retail companies rose 28% within the quarter to $8.48 billion and 21% for the yr to a document $37.4 billion.
Insurance companies equivalent to Geico benefited from improved underwriting high quality and better funding earnings as rates of interest rose, offsetting wage pressures on the BNSF railroad and wildfire losses at Berkshire Hathaway Energy.
“Results reflect the value of holding a diversified collection of operating businesses,” mentioned Jim Shanahan, an Edward Jones analyst with a “hold” score on Berkshire.
Investment beneficial properties in Berkshire’s $354 billion fairness portfolio, together with shares equivalent to Apple, American Express, Bank of America and Coca-Cola, helped the corporate generate a $96.2 billion annual revenue.
The quantity displays accounting guidelines that require Berkshire to report beneficial properties in shares it hasn’t offered, nevertheless, making it “worse-than-useless” to investors in accordance to Buffett.
Berkshire’s warning, and one of many causes for its document money stake, was mirrored in its having offered about $24 billion extra shares than it purchased in 2023.
Results additionally included a few of Occidental Petroleum’s earnings, which mirrored Berkshire’s roughly 28% stake within the oil firm.
Mr. Buffett mentioned he expects Berkshire will hold that stake “indefinitely,” together with its stakes in 5 Japanese buying and selling homes: Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo.
Berkshire’s companies additionally embrace industrial components and chemical firms, an enormous actual property brokerage, and retail manufacturers equivalent to Dairy Queen, Fruit of the Loom and See’s candies.
