Feb. 22 (UPI) — Billionaire Warren Buffett, marking 60 years leading Berkshire Hathaway, told shareholders in his annual letter released Saturday that he continues to prefer stocks despite a higher cash position.
Berkshire’s latest quarterly results and annual report released Saturday morning showed cash and equivalents at $334.2 billion in the fourth quarter vs. $325.2 billion in the third quarter and $276.9 billion in the second. The company’s fourth-quarter operating profit surged 71% to $14.5 billion, according to the 150-page report.
“Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities. That preference won’t change,” Buffett wrote in his 15-page letter.
CNBC reported Berkshire’s large ownership of cash has raised questions among shareholders and observers especially while interest rates are expected to fall from their multi-year highs.
Yet, shareholders look at his remarks for signals on how he might deploy cash or whether the accumulation points to concerns about the broader market, MarketWatch reported.
Buffett, 94, owns about 15.1% of the company’s economic interest and 31.2% of its voting interest as the company’s largest shareholder.
He is the seventh richest person in the world with a net worth $149.5 billion through Saturday, according to Forbes.
Berkshire Hathaway traces its roots to 1839 as Valley Falls Company, a textile manufacturer in New England, before mergers with Hathaway Manufacturing Company in 1888 and Berkshire Fine Spinning Associates in 1929.
The company was “mired in a terrible business,” according to Buffett, and he purchased his first shares of Berkshire in December 1962.
The company’s market capitalization now is $1.03 trillion.
Company’s success
Berkshire shares were up 25% in 2023 and 16% and 024 and up 5% so far this year.
The S&P 500 has gained more than 20% for two years in a row.
Buffett said Berkshire “did better than I expected though 53% of our 189 operating businesses reported a decline in earnings. We were aided by a predictable large gain in investment income as Treasury Bill yields improved and we substantially increased our holdings of these highly-liquid short-term securities.”
Shares closed at $478.74 Friday with a 3.06% daily decline as stock indexes suffered their worst loss of the year.
He has continued to halt buyback of Berkshire stock, repurchasing no shares in the fourth quarter or in the first quarter through Feb. 10.
Berkshire sold more than $134 billion worth of stocks in 2024 with the shrinking of Berkshire’s two largest equity holdings: Apple and Bank of America.
“We are impartial in our choice of equity vehicles, investing in either variety based upon where we can best deploy your [and my family’s] savings,” Buffett wrote. “Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities.”
Berkshire’s investment strategy
Berkshire’s portfolio of shares in publicly traded companies stood at $272 billion in the fourth quarter
Buffett and his investment team oversee around 50 stocks in equities. The top five stocks are Kraft Heinz, Apple, Occidental Petroleum, American Express and Sirius XN.
“Understandably, really outstanding businesses are very seldom offered in their entirety, but small fractions of these gems can be purchased Monday through Friday on Wall Street and, very occasionally, they sell at bargain prices,” Buffett wrote in his letter.
There are “a few rare gems, many good-but-far-from-fabulous businesses and some laggards that have been disappointments,” Berkshire said.
Buffett noted bad outcomes.
“Sometimes I’ve made mistakes in assessing the future economics of a business I’ve purchased for Berkshire — each a case of capital allocation gone wrong,” he wrote. “That happens with both judgments about marketable equities — we view these as partial ownership of businesses — and the 100% acquisitions of companies.
“At other times, I’ve made mistakes when assessing the abilities or fidelity of the managers Berkshire is hiring. The fidelity disappointments can hurt beyond their financial impact, a pain that can approach that of a failed marriage.”
He has expressed unhappiness about an expensive market and few buying opportunities.
“Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities – mostly American equities although many of these will have international operations of significance,” Buffett wrote. “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned.”
Buffett emphasized that Berkshire would never prefer ownership of cash-equivalent assets over the ownership of “good businesses” through controlling or partial ownership.
“Paper money can see its value evaporate if fiscal folly prevails. In some countries, this reckless practice has become habitual, and, in our country’s short history, the U.S. has come close to the edge,” Buffett wrote. “Fixed-coupon bonds provide no protection against runaway currency.”
Buffett he will deploy capital in five Japanese trading houses he began buying nearly six years ago.
Buffett’s successor
At last year’s annual meeting, Buffett announced that Greg Abel, vice chairman of non-insurance operations, will have the final say on all Berkshire’s investing decisions, including overseeing the public stock portfolio.
Buffett has named him as his successor.
“Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities,” Buffett said. “Greg has vividly shown his ability to act at such times as did Charlie.”
The company’s annual shareholders’ meeting is scheduled for May 3 in Omaha, Neb.