On Saturday, billionaire investor Warren Buffett expressed his continued confidence in the American economy and his company Berkshire Hathaway Inc. (BRKa.N).
The 92-year-old Buffett urged investors in his annual letter to Berkshire shareholders to ignore higher inflation and other factors that in 2022 dragged down stock prices, but not Berkshire’s, and instead concentrate on the big picture over the long term.
He also told people not to let “self-criticism and self-doubt” get them down. He pointed out that Berkshire Hathaway has benefited from the country’s growth during his 58 years as CEO from Omaha, Nebraska, and will continue to do so after he leaves the company.
Buffett stated, “We count on the American Tailwind and, though it has occasionally been becalmed, its propelling force has always returned.
“I have yet to come across an instance where betting against America over the long run made sense. And I highly doubt that any of the readers of this letter will go on to experience something different in the future.”
Additionally, Berkshire bought back $7.9 billion of its own stock in 2022, demonstrating its belief that it was undervalued. Buffett defended buybacks, which were criticized by Washington politicians.
The letter was accompanied by Berkshire’s year-end financials, which showed an operating profit of $30.8 billion, a record.
With many of Berkshire’s strongest businesses surviving pressures from high inflation, rising interest rates, and supply chain disruptions, Buffett dubbed 2022 a “good year” for the company.
In addition, Berkshire reported a $22.8 billion annual net loss in contrast to a $89.8 billion gain in 2021 as a result of falling stock prices for Apple Inc (AAPL.O) and a number of other stocks in its sizable investment portfolio.
Because net results are erratic and impacted by accounting regulations, Buffett downplays them.
The BNSF railroad, Geico auto insurance, and well-known consumer brands like Dairy Queen, Duracell, and Fruit of the Loom are just a few of the operating companies that Berkshire owns. More than 382,000 people work there.
Despite being arguably the most well-known American investor still alive, many observers noted that Buffett appeared cautious, if not downright sorry, about his difficulties navigating the markets. According to Forbes magazine, his $106 billion net worth places him fifth in the world.
Thomas Russo, a partner at Gardner Russo & Quinn and a longtime Berkshire investor, said of Buffett: “Buffett is very humble in assessing his own investment prowess, and unnecessary so. Over the years, investors have benefited from him.
From 1965 to 2022, shareholders who stayed with Berkshire saw their shares increase in value by 3,787,464%. Over that time, the Standard & Poor’s 500 (.SPX) increased by 24,708%, dividends included.
Buffett claimed that the majority of his capital allocation choices were merely “so-so,” and that only a handful of his “truly good” choices were responsible for Berkshire’s “satisfactory” long-term performance.
Buffett claimed that “efficient” markets were only found in textbooks. Marketable stocks and bonds are actually perplexing, with their behavior typically only making sense in hindsight.
Even in the face of inevitable setbacks, Buffett added that running large companies requires “trust and rules,” and he urged investors to avoid focusing too much on current market conditions.
Buffett took a “subtle swipe,” according to CFRA Research analyst Cathy Seifert, at detractors who wanted to see him disclose more information about Berkshire’s biggest companies and make more aggressive investments.
Seifert described the current economic environment as “very schizophrenic,” for lack of a better term. “Buffett is voicing that annoyance.”
Despite spending $11.5 billion to acquire the insurance company Alleghany Corp in October, Berkshire ended 2022 with $128.6 billion in cash because it started selling a lot of stock in the latter part of the year, including Taiwanese semiconductor maker TSMC (2330.TW).
Democratic Party leader Warren Buffett appeared to be subtly criticizing President Joe Biden in his letter, which called for a quadrupling of the 1% tax on corporate stock buybacks that Biden signed into law in his Inflation Reduction Act last August.
Despite the fact that Biden hasn’t called for a ban on buybacks, Buffett criticized those who assert that all repurchases “are harmful to shareholders or to the country, or particularly beneficial to CEOs,” calling them “either an economic illiterate or a silver-tongued demagogue.”
Long-time Smead Capital Management investor Bill Smead said of the man: “He’s making fun of people who try to add value without adding money.”
Buffett also emphasized to investors how much Berkshire contributes to the federal government’s coffers, paying $32 billion in income taxes over a ten-year period.
According to Buffett, Berkshire hopes and anticipates paying significantly more in taxes over the coming ten years. “We owe the nation nothing less,”
While Vice Chairman Greg Abel, 60, has been named by Berkshire as Buffett’s eventual successor as CEO, Buffett used his letter to express his continued affection for Charlie Munger, the 99-year-old Vice Chairman of the company.
The annual shareholder weekend for Berkshire, dubbed “Woodstock for Capitalists,” which attracts tens of thousands of people to Omaha, will take place in early May, he said.
Buffett said, “I never get off the phone with Charlie without learning something. In addition, he makes me laugh as well as think.
