Warren Buffetts Berkshire Hathaway Posts Big Loss in 2022 Rocky

Warren Buffett’s Berkshire Hathaway Posts Big Loss in 2022, Rocky Market

Warren Buffett is still betting on America.

Stocks and bonds plummeted in 2022 after central banks hiked interest rates at a rapid pace to try to curb inflation. But Mr. Buffett maintained his optimism in his annual letter to investors on Saturday, saying he continues to believe in the resilience of the US economy.

“I’ve been investing for 80 years – more than a third of our country’s lifetime. Despite our citizens’ fondness – almost enthusiasm – for self-criticism and self-doubt, I have never seen a time when it made sense to make a long-term bet against America,” Mr. Buffett said in the letter.

Mr. Buffett, widely regarded as one of the world’s top investors, has been publishing the letters for more than half a century. During that time, he’s not only reflected on the past year for his company, Berkshire Hathaway Inc., BRK.B 0.31%, but also shared his thoughts on everything from esoteric accounting rules to his aversion to excessive risk-taking.

Saturday’s letter offered readers a glimpse of how Mr. Buffett, 92, viewed what was becoming a shaky trajectory for the markets. Mr. Buffett’s portfolio also took a hit, as Berkshire posted a loss for 2022 in large part on investment losses.

The volatility presented Berkshire with an opportunity to jump in and buy shares. While Berkshire bought back most of its own stock in 2021, 2022 saw it focus more on investing in other companies — including opening new positions in media company Paramount Global and building materials maker Louisiana-Pacific Corp. and quickly became Occidental Petroleum Corp.’s largest single shareholder.

At the end of 2022, Berkshire was the largest shareholder in eight companies — American Express Co., Bank of America Corp., Chevron Corp., Coca-Cola Co., HP Inc., Moody’s Corp., Occidental, and Paramount Global.

Berkshire is able to make large investments because its insurance business generates billions of dollars in float, or premiums, that customers pay up front, which Berkshire can in turn use in the markets. The acquisition of property and casualty insurer Alleghany Corp. last year helped grow its insurance portfolio — which Mr. Buffett described as an extraordinary asset for Berkshire — to $164 billion last year, Mr. Buffett said.

How do Mr. Buffett and his right-hand man, Charlie Munger, decide where to put the money? Both have said they don’t base their decisions on where they think interest rates, oil prices, or other factors affecting markets will be a year from now.

“Although economists, politicians and many of the public have opinions about the implications of this huge imbalance, Charlie and I plead ignorance and firmly believe that short-term economic and market projections are worse than useless,” he said in Saturday’s letter.

Instead, the two are focused on investing Berkshire’s money “in a manner that produces an acceptable outcome over time and maintains the company’s unmatched staying power when financial panics or severe global recessions occur,” he said. Berkshire reported cash and cash equivalents of $128.6 billion at the end of 2022, down from a record $146.7 billion at the end of 2021 but up from the third quarter.

While Berkshire’s original business, a New England textile operation, no longer exists, Mr. Buffett said that Berkshire’s focus on what he called the American tailwind has kept it able to deliver returns to shareholders.

“America would have done well without Berkshire. The opposite is not the case,” he said. Mr. Buffett also defended the practice of stock buybacks in his letter. Berkshire spent nearly $8 billion buying back its stock in 2022, compared to a record $27 billion the year before.

Though critics of buybacks claim that companies should better invest that money in their businesses, proponents like Mr. Buffett say they can benefit shareholders if executed when a company’s stock price is trading below its worth.

“When you’re told that all buybacks hurt shareholders or the country, or particularly benefit CEOs, you’re either listening to an economic illiterate or a silver-tongued demagogue,” he said.

Berkshire also released its 2022 results on Saturday.

The Omaha, Neb. company, which owns companies such as insurer Geico, railroad BNSF Railway and chocolate maker See’s Candies, posted a $22.82 billion loss for the year in 2021 as shares soared, Berkshire posted a profit of $90.8 billion.

Total revenue increased 9.4% to $302.1 billion.

Berkshire’s operating profits, which exclude some investment results, rose to a record $30.8 billion. In the fourth quarter, operating profits declined 8% to $6.7 billion, weighed down by lower railroad profits.

SHARE YOUR THOUGHTS

What’s your view on Berkshire Hathaway? Join the conversation below.

Mr. Buffett, Berkshire’s chief executive officer, has long believed that operating profits better reflect how Berkshire is doing because accounting regulations require the company to include unrealized gains and losses on its massive investment portfolio in its net income. Volatile markets can cause Berkshire’s net income to change significantly from quarter to quarter, regardless of how its underlying businesses perform.

“Clearly, capital gains have been hugely important to Berkshire over the past few decades, and we expect them to be significantly positive in the decades to come,” Mr. Buffett said in his letter. “But their quarter-to-quarter volatility, regularly and thoughtlessly overwritten by the media, completely misinforms investors,” he said, adding that he and Mr. Munger are urging shareholders to focus on Berkshire’s operating profits instead focus.

Write to Akane Otani at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8