Berkshire Hathaway recently reported $45.2 billion in earn- ings for 2020, down 48% fromthe previous year as operating incomefell 9%, according to Warren Buffett’s2021 letter to shareholders.
“Operating earnings are what countmost,” wrote Buffett, noting that thefirm not only failed to increase earningsbut also failed to make any sizable acquisitions — both key goals of the firm.
The decline in operating earningsresulted largely from an $11 billion write-down due almost entirely to Berkshire’sownership of Precision Castparts (PCC),bought in 2016.
“I paid too much for the company,”wrote Buffett. “I was simply too optimistic about PCC’s normalized profitpotential … laid bare by adverse developments throughout the aerospaceindustry, PCC’s most important sourceof customers.” Buffett called the error“a big one.”
THE UP SIDE
Berkshire Hathaway did, however, increase the company’s per-shareintrinsic value by retaining earnings andrepurchasing about 5% of its shares,according to Buffett. Its stock finished2020 with a 2.4% gain, its weakest performance since 2015 when shares fell12.5% and far below the 18.4% gain inthe S&P 500.
Throughout this year’s annual shareholder letter, like the others that preceded it, Buffett offered words of wisdomfor investors, and he disclosed what hetermed a surprise.
He will appear on stage in Los
Angeles, along with his partner Charlie
Munger and Vice Chairmen Ajit Jain
and Greg Abel — considered the two
front-runners as his successor — at
this year’s annual shareholder meeting
set for May 1. In addition, it will be a
virtual meeting live-streamed by Yahoo
with questions relayed by CNBC’s
Nowhere in the letter did Buffettmention the coronavirus pandemic,which has claimed over 500,000 livesin the United States and more than 2. 5million globally and which was a majorfactor in global bond markets last yearand at times for stock markets as well.
Here are nine takeaways fromBuffett’s letter:
1 “Bonds are not the place to be these days,” wrote Buffett, referencing the 0.93% yield in the 10-yearTreasury at year-end — it has sincespiked to near 1.5% — and negative bondreturns in Germany and Japan.
“Fixed income investors world
By Bernice Napach
Warren Buffett’s 9 Nuggets of Wisdom for
Berkshire Hathaway’s annual shareholder letter includes words of advice —
and some mea culpas.