Thanks to its huge collection of businesses — from insurance to railroads to candy — Warren E. Buffett’s Berkshire Hathaway is often seen as a barometer for the American economy.
And in that respect, its performance last year mirrored the country’s economic performance as a whole.
Berkshire reported on Saturday that it earned $45.2 billion for 2020, down 48 percent from the previous year, while its operating earnings fell. But while the pandemic had hurt many of its business lines — and forced Berkshire to again stage its forthcoming annual meeting as an online-only event, this time in Los Angeles — its profits rose 23 percent in the fourth quarter, as its stock investments were bolstered by soaring markets.
Among the biggest winners in Berkshire’s vast investment portfolio was its 5.4 percent stake in Apple, whose shares have been among the top market winners over the past year. In his annual letter to investors that accompanied the company’s financial results, Mr. Buffett noted that the iPhone maker was now one of his company’s three biggest assets, with its stake worth $120 billion as of Dec. 31. (Berkshire calculates that it paid $31 billion for its holdings.)
And Mr. Buffett, who is Berkshire’s chairman and chief executive, professed enthusiasm for another investment: Berkshire’s own shares. The conglomerate spent $24.7 billion buying back its own stock last year, and said that it has already spent more money doing so since.
To Mr. Buffett, stock repurchases may not be immediately exciting, but they give existing Berkshire shareholders even more of a stake in what he called “exceptional businesses.”
In a nod to the kind of slightly cheeky language he has long been known for, he wrote, “And as a sultry Mae West assured us: ‘Too much of a good thing can be … wonderful.’”
But Mr. Buffett’s stock repurchases suggest that the huge amounts of cash that Berkshire generates every year from its insurance holdings — which he has called his “elephant gun” — are unlikely to be spent on the kind of major corporate acquisitions that have been among his signature business achievements. Berkshire ended last year with $138 billion in cash, an enormous pile that he must find ways to spend.
The Berkshire chief also admitted to a big mistake: the $37.2 billion that he paid in 2016 to buy Precision Castparts, a maker of airplane parts, in what was company’s biggest-ever takeover. Precision Castparts has failed to live up to expectations, leading up to an $11 billion accounting write-down that Mr. Buffett himself called “ugly.”
“No one misled me in any way,” he wrote in the letter, praising the company as the best in its field. “I was simply too optimistic”
In the annual letter — which Mr. Buffett’s legions of devotees read every year, a tradition now in its fifth decade — the billionaire offered his thoughts on the company’s performance. But he made relatively few grand pronouncements on issues of global import, from the trillions spent propping up economies around the world to the 2020 presidential election results.
Nor did the letter touch much on a perennial topic that the 90-year-old Mr. Buffett is asked about: who will succeed him as chief executive.
He did offer a dour assessment of debt investments. The prices of government bonds like United States Treasury notes plunged in recent days, as investors worried about potential inflation arising from governments’ enormous economic stimulus spending. Investors in debt securities, he wrote, “face a bleak future.”
And Mr. Buffett offered a quick reprise of his regular encomiums to the United States, asserting, “There has been no incubator for unleashing human potential like America.”
While he allowed that progress toward improving the country has been “slow, uneven and often discouraging,” he added, “Our unwavering conclusion: Never bet against America.”
