The highlight of every year’s Buffettstock is the moment when the grand old men of American investing, Warren Buffett and Charlie Munger, take the stage in Omaha to regale the assembled adepts of all Berkshire Hathaway’s triumphs and future plans, and also to throw shade at those things and people they do not like. Well, Buffett’s giving us a bit of a preview of May’s festivities in his annual letter to shareholders, and he’s not holding back on the aspersion-casting.
Mr. Buffett was particularly critical of those who have increasingly turned to riskier investments thanks to record-low interest rates. This practice, he argues, will be a mistake.
“Some insurers, as well as other bond investors, may try to juice the pathetic returns now available by shifting their purchases to obligations backed by shaky borrowers. Risky loans, however, aren’t the answer to inadequate interest rates. Three decades ago, the once-mighty savings and loan industry destroyed itself, partly by ignoring that maxim,” he said….
“American CEOs have an embarrassing record of devoting more company funds to repurchases when prices have risen than when they have tanked,” he wrote.
During the fourth quarter the company bought back around $9 billion of Berkshire shares, bringing the total 2020 repurchase to a record $24.7 billion…. The figures compare to the $5 billion total the company spent on buybacks in 2019….
“In no way do we think that Berkshire shares should be repurchased at simply any price,” Buffett said in the annual letter…. “Our approach is exactly the reverse….”
Even after Berkshire’s record 2020 buyback, the firm still has a sizable cash pile at $138 billion. The figure is down from $145.7 billion at the end of the third quarter.
The Oracle of Omaha said in his annual letter to shareholders that his 2016 purchase of the company Precision Castparts went bad, forcing Berkshire to “write down,” or deduct, nearly $11 billion from its bottom line last year.
Buffett labeled the write-down on the company, “ugly.” And he blamed himself, saying it was “almost entirely the quantification of a mistake I made in 2016.”
It all adds up to the makings of a real bummer of a Buffettstock, assuming one can actually attend it this year. But there is some good news in the Oracle’s missive, which is that if one is able to safely commune with his or her fellow Hatha-heads, it will be in sunny southern California—where Munger lives and where Buffett wrote some of his best material—rather than dreary and pestilent Omaha.
It will be held in Los Angeles, where investors will be able to ask questions of him, as well as Vice Chairmen Charlie Munger, Ajit Jain and Greg Abel. Last year, thanks to the pandemic, Mr. Buffett’s 97-year-old business partner, Mr. Munger, wasn’t able to attend.
Warren Buffett Defends Berkshire Hathaway’s $25 Billion in Buybacks [WSJ]
Buffett is buying back more Berkshire stock this year after record $25 billion repurchase in 2020 [CNBC]
Warren Buffett admits ‘mistake’ cost Berkshire Hathaway $11 billion [N.Y. Post]