- 1 Buffett specially brought out the most important "Big Four" this year to chat with shareholders. In addition to insurance and BNSF rail businesses, Apple and Berkshire Energy make up the other half;
- 2 As is customary, Berkshire continues to publish its annual top 15 individual stock positions in shareholder letters, accounting for 88% of the overall equity investment;
- 3 At the end of 2021, Berkshire's cash and cash equivalents amounted to $144 billion, of which $120 billion was U.S. Treasury bonds.
Financial Associated Press (Shanghai, editor Shi Zhengcheng) news, in the early morning of February 26, local time, Berkshire Hathaway submitted the financial report at the same time, but also released a highly anticipated annual shareholder letter. For investors who have been affected by the situation in Russia and Ukraine for three full days, the Omaha stock god who personally bought and sold stocks during World War II spoke at this time, which has the meaning of "timely rain".
(Source: Berkshire Shareholder Letter)
As always, Buffett does not like to talk about the hottest political issues of the moment in shareholder letters, and in this year's slightly shorter shareholder letter, the focus of the stock god is still on the investment itself, and there is no mention of the much-watched retirement or shift issue, after all, Buffett is 91 years old.
Sing the praises for Cook
At the beginning of the shareholder letter, Buffett emphasized that the effort to increase the intrinsic value of the company's stock has been a top priority for the past 57 years, and will continue to be so. Although this sentence itself is a polite remark, it also shows that the 91-year-old man continues to play the stock market.
While Chinese investors recognize Buffett and Berkshire as stock gods, Berkshire is also the company that owns and operates the most infrastructure assets in the United States. Berkshire paid a total of $3.3 billion in federal income taxes in 2021, along with huge state and foreign taxes. In fact, by holding Berkshire stock, investors actually own an all-encompassing physical property, such as Berkshire's Marmon Group, which has more than 100 businesses.
But in so many businesses, Buffett this year specially brought out the most important "Big Four" (Big Four) to chat with shareholders. In addition to insurance and BNSF rail businesses, Apple and Berkshire Energy make up the other half.
For Apple, which ranks second in importance, Buffett also mentioned the "magic of buyback" again. The stock god said that the company's share of Apple's equity at the end of 2021 increased to 5.55% from 5.39% in the previous year, and this part of the increase did not cost Berkshire a penny, and was completely caused by Apple's repurchase.
Buffett also reminded investors that in addition to the $785 million that Apple paid to Berkshire in 2021, the indirect holdings of Apple shares held by shareholders will be equivalent to $5.6 billion in profits in 2021, many of which will be used to buy back shares, which Buffett has been highly praising.
In the shareholder letter, Buffett also praised Apple CEO Cook as "a great person", in addition to apple product users "as the most loved people", excellent management touch has also benefited supporters a lot.
In the context of the new energy transformation, Berkshire Energy Group, the pillar business of the company, achieved a record profit of $4 billion in 2021, a full thirty times more than when the company first bought the company's shares in 2000.
Buffett also emphasized the position of energy companies in the global transformation wave, saying that Berkshire Energy entered the new energy field as early as 2007, and has become a leader in wind and solar energy in many states in the United States, which is very different from those companies that "wash green" (bragging about the concept of new energy).
Continue to lament that "there is no suitable target"
As is customary, Berkshire continues to announce its annual top 15 individual stock holdings in shareholder letters, accounting for 88% of the overall equity investment. As of the end of 2021, the company's stock holdings reached $350.719 billion, up nearly $70 billion year-on-year.
(Source: Berkshire Annual Report)
Since the operation of the stock god has been closely watched by the market, the above-mentioned changes in positions are also expected. The two new faces that have made it to the top fifteen positions this year are Mitsubishi Trading Company, a large Japanese trading company, and Mitsui & Co. The investment is also seen as a success story of Buffett's bets on inflation, rising prices of commodities such as crude oil and the depreciation of the dollar. According to the shareholder letter, the three Japanese trading companies on the list alone contributed $1 billion in profits to Buffett.
Buffett also mentioned the issue of ultra-high cash holdings in the shareholder letter. Berkshire's cash and cash equivalents at the end of 2021 amounted to $144 billion, of which $120 billion was U.S. Treasury bonds. But why hold so much cash?
On the one hand, for financial health reasons, Buffett and Munger had promised to hold no less than $30 billion in cash and cash equivalents. Buffett emphasized that the move was not intended to be patriotic, and that his preference for corporate ownership had never changed since his first stock purchase on March 11, 1942. At present, Berkshire's holding level is still due to the inability to find a company (or part of the equity) that meets Berkshire's holding criteria.
After multiple channels to increase shareholder returns have had little effect, Berkshire can only indirectly increase the proportion of shareholders holding equity through buybacks, thereby increasing investment returns. Since 2019, the company has invested a total of $51.7 billion to repurchase 9% of the outstanding shares. Buffett also stressed that for the buyback to be valuable, the buyback price must be reasonable, and the company's buyback operation "appetite is still very large", but it will continue to be based on the price. Stock God also disclosed that as of February 23, 2022, Berkshire had repurchased another $1.2 billion worth of shares.
At the end of the shareholder letter, Buffett also announced that this year's annual general meeting will be held in Omaha from April 29 to May 1.