Buffett still wants offers but can’t find any good ones | app

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JOSH FUNKAssociated Press

OMAHA — Billionaire Warren Buffett says his company has had “extraordinary luck” in finding acquisitions like the BNSF Railroad over the decades, but he hasn’t had much in recent years as cash of Berkshire Hathaway reached nearly $147 billion.

Buffett sought to reassure shareholders with his annual letter Saturday that he retains a strong appetite for acquisitions and equity investments, but he hasn’t found many that interest him at today’s inflated prices. In fact, Berkshire was a net seller of stocks again last year, offloading $7.4 billion more shares than it bought.

He blamed persistently low interest rates for helping to drive up the price of stocks and entire companies, and in the past he said growing competition from private equity buyers also made it difficult to find good deals.

“From time to time, these possibilities are both plentiful and obviously attractive. Today, however, we find little that excites us,” Buffett wrote of the prospects of finding good stock investments.

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Berkshire has therefore focused on growing the roughly 90 companies the Omaha, Nebraska-based conglomerate already owns and buying back its own stock — something Buffett has invested $51.7 billion in over the course of the year. the past two years, including $27 billion last year. But the pace of buybacks may have slowed down a bit as Berkshire has bought just $1.2 billion of its own stock so far this year.

With Berkshire companies generating about $7 billion in cash each quarter, redemptions have not been enough to significantly reduce the cash pile. And Buffett said he will always keep at least $30 billion on hand to ensure Berkshire can cover any catastrophic claims on insurance policies his companies carry.

Buffett’s letter is still well-read in the business world due to his remarkable successes, but he kept his message focused on Berkshire businesses and didn’t mention politics or talk much about the broader economy. .

He also gave no new details about Berkshire’s succession planning in his first letter since he said last spring that Berkshire Vice Chairman Greg Abel would one day replace him as CEO. CEO, although the 91-year-old Buffett has no plans to retire. Buffett only confirmed the plan after his business partner, Charlie Munger, slipped up and hinted at it at last year’s annual meeting.

“I felt like there was an opportunity here for Buffett to do something more formal and comment on Abel’s qualifications or why shareholders and investors should believe he was the right one. candidate. There could have been more commentary on that,” Edward Jones analyst Jim Shanahan said.

Investor Bill Smead said Buffett also didn’t devote much space in his letter to warning people about foolish behavior, as he has often done in the past.

“It just seems like the last two or three years of letters and annual meetings, there’s just been a lot more he didn’t say than he did,” Smead said.

But Buffett warned investors to be careful when reading other companies’ financial reports to make sure they account for all their costs when reporting earnings.

“Misleading ‘adjustments’ in earnings – to use a polite description – have become both more frequent and more fanciful as stocks have risen. Speaking less politely, I would say that bull markets breed puffy bulls. .,” Buffett wrote.

Despite the lack of acquisitions and new investments, Berkshire continued to benefit from the rebound in the economy from the depths of the pandemic. The company said it earned $39.6 billion, or $26,690 per Class A share, during the fourth quarter. That’s up from $35.8 billion, or $25,015 per Class A share, a year ago.

“In 2021, the majority of operating companies benefited from the tailwind of an economic recovery,” said Cathy Seifert, analyst at CFRA Research.

But those net numbers were inflated by paper earnings on Berkshire’s investments, which is why Buffett argues that operating profits are a better measure of company performance because they exclude investments and derivatives. By this measure, Berkshire’s operating income fell from $5.02 billion, or $3,224.74 per Class A share, to $7.3 billion, or $4,904.23 per share. category A, during the fourth trimester.

The four analysts polled by FactSet expected Berkshire to report operating income per Class A share of $4,197.84 in the quarter.

Buffett said the four main pillars of Berkshire’s business — its insurance companies, its $161 billion investment in Apple shares, the BNSF railroad and its utility collection — have all helped it. to succeed last year. The railroad alone contributed a record profit of $6 billion last year, while utilities set their own record with a profit of $3.5 billion. And Buffett hailed Apple CEO Tim Cook as a brilliant leader.

Buffett said this year Berkshire will bring back the full slate of events surrounding the company’s annual meeting that regularly drew more than 40,000 people before the pandemic forced it to go virtual for the past two years. But anyone who wants to attend the April 30 meeting in Omaha to hear Buffett spend hours answering questions will need to prove they’ve been vaccinated against COVID-19.

Berkshire has an eclectic variety of businesses, including BNSF, a number of large electric utilities, Geico Insurance, and an assortment of manufacturing and retail businesses. The conglomerate also has large equity investments in Apple, Coca-Cola, Bank of America and other companies.

Contact the writer at 402-473-7391 or [email protected]

On Twitter @psangimino

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