5 Takeaways from Buffett's FY2021 Shareholder Letter
Warren Buffett released his well-anticipated FY21 shareholder letter on 26 Feb 2022.
Here are 5 takeaways. $Berkshire Hathaway-B(BRK.B.US$
#1 Berkshire has the most plant and equipment among American companies
"Berkshire owns and operates more U.S.-based “infrastructure” assets – classified on our balance sheet as property, plant and equipment – than are owned and operated by any other American corporation. That supremacy has never been our goal. It has, however, become a fact."
That's a cool fact. While the world is touting asset-light businesses, here we have Berkshire being the asset heaviest company in America. It wasn't deliberate but I think he saw these asset-heavy companies being irreplaceable (insurance, oil & gas and railroads), undervalued and competitor-less when investors move on to sexier tech.
I recalled Munger explained that no one is going to sink in billions to build another railroad in the US. BNSF has negligible threat of new entrants.
Unintentionally Buffett found himself in a good position in an inflationary environment with these assets.
Buffett has also made investments in Japanese trading companies in 2020 and three of them are within Berkshire's largest public stock holdings - ITOCHU, Mitsubishi and Mitsui. These are stocks that should do well during inflation too.
#2 Berkshire didn't find anything attractive to buy except their own shares
"Berkshire’s balance sheet includes $144 billion of cash and cash equivalents... Berkshire’s current 80%-or-so position in businesses is a consequence of my failure to find entire companies or small portions thereof (that is, marketable stocks) which meet our criteria for longterm holding."
Berkshire has been hoarding a lot of cash as Buffett didn't find any attractive investments. He pointed out the interest rate issue briefly which I think was one of the key reasons for his inactivity.
"Other factors influence valuations as well, but interest rates will always be important."
With rising interest rate in the horizon, he is thinking that all the stock valuations would have to turn down several notches. Hence most investments wouldn't seem cheap enough for him. Instead, he found Berkshire Hathaway shares trading at wonderful prices and he did share buybacks. He is still doing it as of now...
"As of February 23, 2022, since yearend we repurchased additional shares at a cost of $1.2 billion. Our appetite remains large but will always remain price-dependent."
#3 Buffett has handed over more investment decisions
"Below we list our fifteen largest equity holdings, several of which are selections of Berkshire’s two long-time investment managers, Todd Combs and Ted Weschler."
This is trying to say that Buffett is gradually handing over the reins of making investment decisions to the two investment managers. Buffett is 91 while Munger is 98. Many investors are concerned about succession for the last decade. We can see some evolutionary progress over the years as Buffett profile them more and more.
Here are 5 takeaways. $Berkshire Hathaway-B(BRK.B.US$
#1 Berkshire has the most plant and equipment among American companies
"Berkshire owns and operates more U.S.-based “infrastructure” assets – classified on our balance sheet as property, plant and equipment – than are owned and operated by any other American corporation. That supremacy has never been our goal. It has, however, become a fact."
That's a cool fact. While the world is touting asset-light businesses, here we have Berkshire being the asset heaviest company in America. It wasn't deliberate but I think he saw these asset-heavy companies being irreplaceable (insurance, oil & gas and railroads), undervalued and competitor-less when investors move on to sexier tech.
I recalled Munger explained that no one is going to sink in billions to build another railroad in the US. BNSF has negligible threat of new entrants.
Unintentionally Buffett found himself in a good position in an inflationary environment with these assets.
Buffett has also made investments in Japanese trading companies in 2020 and three of them are within Berkshire's largest public stock holdings - ITOCHU, Mitsubishi and Mitsui. These are stocks that should do well during inflation too.
#2 Berkshire didn't find anything attractive to buy except their own shares
"Berkshire’s balance sheet includes $144 billion of cash and cash equivalents... Berkshire’s current 80%-or-so position in businesses is a consequence of my failure to find entire companies or small portions thereof (that is, marketable stocks) which meet our criteria for longterm holding."
Berkshire has been hoarding a lot of cash as Buffett didn't find any attractive investments. He pointed out the interest rate issue briefly which I think was one of the key reasons for his inactivity.
"Other factors influence valuations as well, but interest rates will always be important."
With rising interest rate in the horizon, he is thinking that all the stock valuations would have to turn down several notches. Hence most investments wouldn't seem cheap enough for him. Instead, he found Berkshire Hathaway shares trading at wonderful prices and he did share buybacks. He is still doing it as of now...
"As of February 23, 2022, since yearend we repurchased additional shares at a cost of $1.2 billion. Our appetite remains large but will always remain price-dependent."
#3 Buffett has handed over more investment decisions
"Below we list our fifteen largest equity holdings, several of which are selections of Berkshire’s two long-time investment managers, Todd Combs and Ted Weschler."
This is trying to say that Buffett is gradually handing over the reins of making investment decisions to the two investment managers. Buffett is 91 while Munger is 98. Many investors are concerned about succession for the last decade. We can see some evolutionary progress over the years as Buffett profile them more and more.
$Apple(AAPL.US$
#4 Berkshire holding a Face-to-Face AGM
"Clear your calendar! Berkshire will have its annual gathering of capitalists in Omaha on Friday, April 29th through Sunday, May 1st."
Berkshire is going to hold a face-to-face AGM once again since Covid happened. This shows that we are ready to live again and I want to travel again to see the world. Expect Buffett to be the last person to hold an AGM in the metaverse. Our battle against Covid is almost done but our war with viruses will not. There will be more pandemics or epidemics in the future. We will need to keep up and come out with solutions to save mankind.
#5 Luck determines where we are born
"Our country would have done splendidly in the years since 1965 without Berkshire. Absent our American home, however, Berkshire would never have come close to becoming what it is today. When you see the flag, say thanks."
Couple this with what's happening in Ukraine, it is indeed true that we should be grateful to luck if we are born in a good place. What if I was born in Ukraine or Syria?
#4 Berkshire holding a Face-to-Face AGM
"Clear your calendar! Berkshire will have its annual gathering of capitalists in Omaha on Friday, April 29th through Sunday, May 1st."
Berkshire is going to hold a face-to-face AGM once again since Covid happened. This shows that we are ready to live again and I want to travel again to see the world. Expect Buffett to be the last person to hold an AGM in the metaverse. Our battle against Covid is almost done but our war with viruses will not. There will be more pandemics or epidemics in the future. We will need to keep up and come out with solutions to save mankind.
#5 Luck determines where we are born
"Our country would have done splendidly in the years since 1965 without Berkshire. Absent our American home, however, Berkshire would never have come close to becoming what it is today. When you see the flag, say thanks."
Couple this with what's happening in Ukraine, it is indeed true that we should be grateful to luck if we are born in a good place. What if I was born in Ukraine or Syria?
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