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February 28, 2021

Warren Buffett’s Berkshire Hathaway Inc. bought back a record $24.7 billion of its own stock last year and said there’s more to come, as the conglomerate struggled to find other ways to deploy its enormous pile of cash.

The company’s purchase of $9 billion of shares in the fourth quarter matched a record set in the previous three-month period, Buffett said Saturday in his annual letter to investors.

Berkshire has repurchased more shares since year-end, and is likely to further reduce its share count in the future,” Buffett, 90, said in the letter. “That action increased your ownership in all of Berkshire’s businesses by 5.2% without requiring you to so much as touch your wallet.”

 Buffett’s letter, a closely-watched missive from one of the world’s most renowned investors, devoted large portions to the impact of repurchases, one of Berkshire’s biggest capital-deployment moves last year as it “made no sizable acquisitions.” He also shared his thoughts on the strategy of conglomerates, praising businesses such as Berkshire’s insurance operations and railroad.

He shied away from some of the most controversial issues of the day, including politics, the pandemic and racial equality. But Buffett stood by his optimism for America, saying that progress on achieving a “more perfect union” was uneven but still moving forward.

“Our unwavering conclusion: Never bet against America,” he said.


There was a small amount of progress in paring the cash pile, which fell 5% in the fourth quarter to $138.3 billion. Buffett has struggled to keep pace with the flow in recent years as Berkshire threw off cash faster than he could find higher-returning assets to snap up.

Apple Inc. is one of Berkshire’s top three most-valuable assets, at $120 billion, Buffett said. The technology company has said it intends to repurchase its own shares as well.

“The math of repurchases grinds away slowly, but can be powerful over time,” Buffett said. “The process offers a simple way for investors to own an ever-expanding portion of exceptional businesses.”

Separately, Buffett acknowledged that the $11 billion writedown Berkshire took last year was almost entirely due to what he conceded was a “mistake” in 2016, when he paid too much for Precision Castparts. Precision is a fine company, Buffett said, but he admitted he made a big error.

“I was wrong, however, in judging the average amount of future earnings and, consequently, wrong in my calculation of the proper price to pay for the business,” Buffett said in the letter.

Swings in Berkshire’s massive $281.2 billion stock portfolio feed into the company’s net income because of an accounting technicality. That drove the figure up 23% to $35.8 billion in the fourth quarter from a year earlier.

Berkshire’s Class A shares gained roughly 2.4% last year, falling short of the 16% increase in the S&P 500.

 The billionaire only briefly touched on one of the largest questions looming over Berkshire -- how long he might stay at the helm. He once again referenced a favorite CEO, Mrs. Blumkin, who founded Nebraska Furniture Mart. She worked until she was 103 -- “a ridiculously premature retirement age as judged by Charlie and me,” Buffett wrote, referring to Charlie Munger, 97, a Berkshire vice chairman.

Source: Bloomberg
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