New York (CNN Business)The Oracle of Omaha said he made a mistake.
In his annual letter to shareholders of Berkshire Hathaway (BRKB), investing guru Warren Buffett disclosed that the company took an $11 billion writedown last year on its 2016 purchase of Precision Castparts, describing it as “a mistake.”The 90-year-old billionaire, Berkshire’s chairman since 1970, said in the company’s annual letter to shareholders that the “ugly” writedown had a simple explanation.
“I paid too much for the company,” he said. “My miscalculation was laid bare by adverse developments throughout the aerospace industry.”
Despite that loss and fallout from the pandemic in general, the company’s operating businesses enjoyed a solid end to 2020. The sprawling conglomerate, which owns Geico, Dairy Queen, the Burlington Northern Santa Fe Railway Company, Duracell batteries and many other consumer, financial, industrial and energy companies, said Saturday it posted a net profit of $35.8 billion in the fourth quarter, an increase of 23%. Read MoreBerkshire’s operating profit rose nearly 14% in the quarter, to $5 billion.
The Oracle of Omaha goes to Hollywood
In the letter, Buffett also disclosed that Berkshire Hathaway’s annual shareholder meeting on May 1, normally held in Buffett’s home town of Omaha, Nebraska, will instead be livestreamed from Los Angeles so that vice chairman Charlie Munger, who lives in Southern California, can attend.The 97-year old Munger did not attend last year’s virtual shareholder meeting in Omaha due to the Covid-19 pandemic. Instead, Buffett was joined on stage by another Berkshire vice chairman, Greg Abel. “I missed him last year and, more important, you clearly missed him,” Buffett said of Munger, who is also chairman of California newspaper publisher Daily Journal (DJCO), which held its own shareholder meeting on Wednesday in Los Angeles.
Photos: Warren Buffett: His life in pictures
Photos: Warren Buffett: His life in picturesWarren Buffett, the chairman and CEO of Berkshire Hathaway, attends an event in Washington, DC, in 2012. He is celebrating his 90th birthday this year.Hide Caption 1 of 43
Photos: Warren Buffett: His life in picturesBuffett was born in Omaha, Nebraska, on August 30, 1930. He was the only son of Laila and Howard Buffett. Howard was a US congressman.Hide Caption 2 of 43
Photos: Warren Buffett: His life in picturesA young Buffett, far left, is seen with his grandfather, Ernest, as well as his cousins and two sisters.Hide Caption 3 of 43
Photos: Warren Buffett: His life in picturesLaila Buffett poses with her three children — from left, Roberta, Warren and Doris. Hide Caption 4 of 43
Photos: Warren Buffett: His life in picturesWarren Buffett stands in front of his childhood home in Omaha.Hide Caption 5 of 43
Photos: Warren Buffett: His life in picturesBuffett teaches a class at the University of Nebraska-Omaha.Hide Caption 6 of 43
Photos: Warren Buffett: His life in picturesBuffett married his first wife, Susan, in 1952. They had three children together: Peter, Howard and Susan. The latter two are seen here with their parents.Hide Caption 7 of 43
Photos: Warren Buffett: His life in picturesBuffett and his wife pose at the beach with their three children.Hide Caption 8 of 43
Photos: Warren Buffett: His life in picturesBuffett poses for a photo in 1980.Hide Caption 9 of 43
Photos: Warren Buffett: His life in picturesBuffett testifies before a House subcommittee after the Salomon Brothers investment bank was caught in a treasury bond scandal in 1991. Buffett took over as the company’s chairman of the board to guide it out of troubles with the Federal Reserve System.Hide Caption 10 of 43
Photos: Warren Buffett: His life in picturesBuffett attends one of Berkshire’s annual shareholders meeting. Seated with him here are his daughter Susan, left, and his wife Susan. Buffett’s wife died in 2004.Hide Caption 11 of 43
Photos: Warren Buffett: His life in picturesBuffett arrives at an Omaha Dairy Queen to autograph books and chat with Berkshire Hathaway shareholders in 2002. Many people were in Omaha for Berkshire Hathaway’s annual shareholders meeting, which has been described as “the Woodstock of Capitalism.”Hide Caption 12 of 43
Photos: Warren Buffett: His life in picturesBuffett attends a GEICO ceremony in Trenton, New Jersey, in 2004.Hide Caption 13 of 43
Photos: Warren Buffett: His life in picturesBuffett joins California Gov. Arnold Schwarzenegger during a meeting of Wall Street investors in New York in 2004. Buffett advised Schwarzenegger’s gubernatorial campaign in 2003.Hide Caption 14 of 43
Photos: Warren Buffett: His life in picturesBuffett sits atop a fake bull at the Berkshire Hathaway annual meeting in 2006.Hide Caption 15 of 43
Photos: Warren Buffett: His life in picturesBuffett stacks his chips at a charity poker tournament in Omaha in 2006.Hide Caption 16 of 43
Photos: Warren Buffett: His life in picturesBuffett plays the ukulele with a band during the Berkshire Hathaway meeting in 2007. He learned the instrument decades ago.Hide Caption 17 of 43
Photos: Warren Buffett: His life in picturesBuffett stands in front of a portrait of himself, painted by Michael Israel, in 2008.Hide Caption 18 of 43
Photos: Warren Buffett: His life in picturesBuffett throws out the first pitch before a Kansas City Royals baseball game in 2008.Hide Caption 19 of 43
Photos: Warren Buffett: His life in picturesBuffett sits with Girl Scouts in Omaha in 2008.Hide Caption 20 of 43
Photos: Warren Buffett: His life in picturesBuffett uses a large paddle to play table tennis in 2010.Hide Caption 21 of 43
Photos: Warren Buffett: His life in picturesBuffett and Microsoft Chairman Bill Gates enjoy a meal together at the Hollywood Diner in Omaha in 2010. That year, the two launched The Giving Pledge, which encourages the world’s billionaires to dedicate the majority of their wealth to philanthropic causes.Hide Caption 22 of 43
Photos: Warren Buffett: His life in picturesBuffett is sworn in to testify before the Financial Crisis Inquiry Commission in 2010. The bipartisan committee was created by Congress to investigate the causes of the financial crisis.Hide Caption 23 of 43
Photos: Warren Buffett: His life in picturesPresident Barack Obama awards the Presidential Medal of Freedom to Buffett in 2011. “Today, we know Warren Buffett not only as one of the world’s richest men, but also one of the most admired and respected,” Obama said. “Unmoved by financial fads, he has doggedly sought out value, put his weight behind companies with promise and demonstrated that integrity isn’t just a good trait — it is good for business.”Hide Caption 24 of 43
Photos: Warren Buffett: His life in picturesBuffett is mobbed by journalists and shareholders during Berkshire Hathaway’s annual shareholders meeting in 2011.Hide Caption 25 of 43
Photos: Warren Buffett: His life in picturesBuffett talks with his son Peter before the start of the shareholders meeting in 2011.Hide Caption 26 of 43
Photos: Warren Buffett: His life in picturesBuffett poses for a photo in Omaha in 2012.Hide Caption 27 of 43
Photos: Warren Buffett: His life in picturesBuffett and his second wife, Astrid, arrive at the White House for a state dinner honoring British Prime Minister David Cameron in 2012. The next month, Buffett confirmed that he had been diagnosed with Stage 1 prostate cancer. He underwent radiation treatments and told Berkshire Hathaway shareholders that the cancer was “not remotely life-threatening.”Hide Caption 28 of 43
Photos: Warren Buffett: His life in picturesBuffett looks out at Omaha in 2012.Hide Caption 29 of 43
Photos: Warren Buffett: His life in picturesBuffett wears a Woodrow Wilson High School jacket as he attends an event in Washington, DC, in 2012. Buffett graduated from the Washington high school in 1947.Hide Caption 30 of 43
Photos: Warren Buffett: His life in picturesBuffett is photographed for Forbes magazine in 2012.Hide Caption 31 of 43
Photos: Warren Buffett: His life in picturesBuffett listens as his son Howard speaks during an interview in New York in 2013. Buffett and his late first wife, Susan, gave and pledged billions to each of their three children to fund charitable foundations. Howard, an Illinois farmer, picked global hunger as his target.Hide Caption 32 of 43
Photos: Warren Buffett: His life in picturesBuffett spins a basketball with the help of Chris “Handles” Franklin, one of the Harlem Globetrotters, at the Berkshire Hathaway shareholders meeting in 2013. At left is football star Ndamukong Suh.Hide Caption 33 of 43
Photos: Warren Buffett: His life in picturesBuffett and Berkshire Hathaway Vice Chairman Charlie Munger are seen on a giant screen during the Berkshire Hathaway shareholders meeting in 2013.Hide Caption 34 of 43
Photos: Warren Buffett: His life in picturesBuffett arrives for a conference in Sun Valley, Idaho, in 2014.Hide Caption 35 of 43
Photos: Warren Buffett: His life in picturesBuffett introduces products to shareholders before their annual meeting in 2014.Hide Caption 36 of 43
Photos: Warren Buffett: His life in picturesBuffett goofs off with Cleveland Cavaliers mascot Moon Dog prior to an NBA game in 2014.Hide Caption 37 of 43
Photos: Warren Buffett: His life in picturesBuffett does an interview in 2015.Hide Caption 38 of 43
Photos: Warren Buffett: His life in picturesBuffett listens as presidential candidate Hillary Clinton speaks during an event in Omaha in 2015. Buffett said at the rally that he was supporting Clinton’s bid for president because they share a commitment to help the less affluent.Hide Caption 39 of 43
Photos: Warren Buffett: His life in picturesBuffett attends the world premiere of “Becoming Warren Buffett,” a documentary about his life, in 2017.Hide Caption 40 of 43
Photos: Warren Buffett: His life in picturesBuffett attends Forbes’ 100th anniversary gala in New York in 2017.Hide Caption 41 of 43
Photos: Warren Buffett: His life in picturesBuffett walks through the exhibit hall during Berkshire Hathaway’s shareholders meeting in 2019.Hide Caption 42 of 43
Photos: Warren Buffett: His life in picturesBuffett speaks during Berkshire Hathaway’s virtual shareholders meeting in May 2020.Hide Caption 43 of 43
Buffett said Abel and Berkshire’s third vice chairman, Ajit Jain, will also be on stage in LA to answer questions during the virtual May 1 meeting, which is scheduled to last from 1:30 p.m. ET until 5:30 p.m. Buffett said he hoped Berkshire can once again hold an in-person meeting in Nebraska in 2022.As he often does in Berkshire’s annual letter to shareholders, Buffett — who has a net worth of some $90 billion — dispensed some words of wisdom about the current state of the market.
Staying away from bonds and buying back more Berkshire stock
He is not currently a fan of bonds because despite a recent uptick, yields remain historically low. “Bonds are not the place to be these days,” he wrote, adding that the yield on the 10-year Treasury, now hovering around 1.46%, was 15.8% in 1981. “In certain large and important countries, such as Germany and Japan, investors earn a negative return on trillions of dollars of sovereign debt. Fixed-income investors worldwide — whether pension funds, insurance companies or retirees — face a bleak future,” Buffett noted.
Warren Buffett sells JPMorgan Chase stock and buys VerizonHe also defended Berkshire’s propensity for using cash to buy back its own stock. The company spent $24.7 billion last year to repurchase shares. Some investors have argued that Berkshire could find a better use for its cash, which totaled more than $138 billion in cash at the end of 2020. Berkshire could it use to make more acquisitions.”In no way do we think that Berkshire shares should be repurchased at simply any price,” Buffett wrote. “American CEOs have an embarrassing record of devoting more company funds to repurchases when prices have risen than when they have tanked. Our approach is exactly the reverse.”Still, some wonder if Buffett has lost his Midas touch. Berkshire Hathaway’s stock is up just 11% over the past year, compared to a nearly 23% gain for the S&P 500. The company has lagged the broader market during the past five years, too, despite being a major investor in Apple (AAPL).
‘Hamburgers and Coke’
Buffett, however, defended the company’s investment strategy, describing it as like a classic diner.”At Berkshire, we have been serving hamburgers and Coke for 56 years. We cherish the clientele this fare has attracted,” Buffett wrote.
What does Warren Buffett see in Chevron?Although he has dipped his toe into higher techs like Apple and Amazon (AMZN) recently, the majority of Berkshire’s investments are in slower growth “value” stocks such as Chevron (CVX), Verizon (VZ), American Express (AXP) and, yes, Coca-Cola (KO). (Buffett is an avid drinker of Cherry Coke.)In other words, don’t expect Buffett to start investing in meme stocks like GameStop (GME) or momentum darlings such as Tesla (TSLA). “The tens of millions of other investors and speculators in the United States and elsewhere have a wide variety of equity choices to fit their tastes. They will find CEOs and market gurus with enticing ideas,” he said. “Many of those investors, I should add, will do quite well.”
But Buffett stressed a more patient approach to investing.”All that’s required is the passage of time, an inner calm, ample diversification and a minimization of transactions and fees,” he said.
Source: edition.cnn.com