Warren Buffett remains optimistic and preaches patience in annual letter

Warren Buffett remains optimistic and preaches patience in annual letter

February 25 (Portal) – Billionaire investor Warren Buffett signaled on Saturday that he has not lost his continued confidence in the US economy and his company Berkshire Hathaway Inc (BRKa.N).

In his annual letter to Berkshire shareholders, Buffett, 92, urged investors to focus on the big picture over the long term, rather than higher inflation and other factors that weighed on stock prices in 2022, though not Berkshire’s.

He also urged Americans not to be shaken by “self-criticism and self-doubt,” saying the country’s dynamism has benefited and will benefit Berkshire in his 58 years leading the company from Omaha, Nebraska do after handing over the reins.

“We are counting on the American tailwind, and although it has been weakened from time to time, its momentum has always returned,” Buffett wrote.

“I haven’t seen a point in time when it made sense to bet against America in the long term. And I very much doubt that anyone who reads this letter will have a different experience in the future.”

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Berkshire also repurchased $7.9 billion of its own stock in 2022, signaling confidence that it was undervalued. Buffett defended buybacks, a goal of Washington politicians.

Attached to the letter were Berkshire’s full-year results, including a record $30.8 billion in operating profit.

Buffett called 2022 a “good year” for Berkshire, with many of its strongest companies weathering the pressures of elevated inflation, rising interest rates, and supply chain disruptions.

Berkshire also posted an annual net loss of $22.8 billion, compared to a profit of $89.8 billion in 2021, as Apple Inc (AAPL.O) and many other stocks in its vast investment portfolio fell went back.

Buffett downplays net results because they’re volatile and affected by accounting regulations.

Berkshire owns dozens of operating companies, including auto insurer Geico, BNSF railroad, and well-known consumer brands like Dairy Queen, Duracell, and Fruit of the Loom. It employs more than 382,000 people.

‘VERY HUMBLE’

Several observers have said Buffett is cautious, almost apologetic, about his struggles navigating the markets despite being arguably the most famous American investor alive. His net worth of $106 billion ranks fifth in the world according to Forbes magazine.

“Buffett is very humble about his own investing abilities, and unnecessarily so,” said Thomas Russo, a partner at Gardner Russo & Quinn and a longtime Berkshire investor. “Investors have benefited from him for decades.”

Anyone who stayed at Berkshire from 1965 to 2022 saw their shares rise 3,787,464% in value. The Standard & Poor’s 500 (.SPX) is up 24,708% including dividends over the period.

Warren Buffett, CEO of Berkshire Hathaway, attends the annual Allen and Co. Sun Valley Media Conference in Sun Valley, Idaho, on July 6, 2022. Portal/Brendan McDermid/File Photo

Buffett said most of his capital allocation decisions have been “so-so,” and that Berkshire’s “satisfactory” results over time have been the result of only about a dozen “really good” decisions.

“Efficient markets only exist in textbooks,” Buffett said. “The truth is, marketable stocks and bonds are amazing, and their behavior is mostly understandable only in hindsight.”

Buffett also said that “trust and rules are essential” to running great companies, even amid the inevitable disappointments, and urged investors not to dwell on near-term market conditions.

Cathy Seifert, an analyst at CFRA Research, said Buffett delivered a “subtle smack” to critics who wished he would disclose more than a few paragraphs about Berkshire’s largest companies and invest more aggressively.

“The current market climate was, for lack of a better word, very schizophrenic,” said Seifert. “Buffett is expressing that frustration.”

MUNGER “MAKES ME LAUGH”

Although Berkshire paid $11.5 billion for insurance company Alleghany Corp in October, Berkshire ended 2022 with $128.6 billion in cash as it became a big seller of stocks, including Taiwan’s, by the end of the year Semiconductor manufacturer TSMC (2330.TW).

Buffett, a Democrat, appeared in his letter to indirectly criticize President Joe Biden, who this month called for quadrupling a 1% tax on corporate stock buybacks that became law in his Inflation Reduction Act last August.

While Biden hasn’t called for an end to buybacks, Buffett said those who claim that all buybacks “harm shareholders or the country or are particularly good for CEOs” are “either economically illiterate or a well-spoken demagogue.”

Bill Smead, a longtime Berkshire investor at Smead Capital Management, said, “He pokes fun at people who try to add money without adding value.”

Buffett also reminded investors how much Berkshire is giving back to the US Treasury by paying $32 billion in federal income taxes over a decade.

“At Berkshire, we hope and expect to pay a lot more taxes over the next decade,” Buffett wrote. “We don’t owe the country any less.”

While Berkshire tapped vice chairman Greg Abel, 60, as Buffett’s eventual successor as chairman of the board, Buffett used his letter to renew his affection for friend and business partner Charlie Munger, 99-year-old Berkshire vice chairman.

He said both will attend Berkshire’s annual shareholder weekend in early May, known as “Woodstock for Capitalists,” which draws tens of thousands of people to Omaha.

“I never call Charlie without finding out something,” Buffett said. “And while it makes me think, it also makes me laugh.”

Reporting by Jonathan Stamp in New York; Editing by Ira Iosebashvili, Megan Davies and Diane Craft

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