The highlight of Warren Buffett's annual shareholder letter was his discussion of Berkshire Hathaway's stepped-up stock-buyback activity, which totaled $9 billion in each of the final two quarters of 2020 and $24.7 billion for the year, up from $4.9 billion in 2019.

That should cheer $Berkshire Hathaway Inc.-Class B(BRK.B.US)$ holders as a clear sign that Buffett views the shares as undervalued.

The stock trailed the S&P 500 index by a total of more than 40 percentage points during 2019 and 2020. Last year's buybacks, which totaled 5.2% of Berkshire's shares outstanding, have continued at a strong pace in 2021, with more than $4 billion repurchased through Feb. 16, our analysis shows.

What was missing from the 14-page letter released early Saturday was a discussion of many topics that are important to Berkshire investors. Buffett didn't talk about succession, the significant underperformance of Berkshire shares, missed investment opportunities during 2020, and Berkshire's leadership team.

Berkshire CEO Buffett also didn't address the lack of a dividend at Berkshire, which Barron's has advocated , given its ample earnings and huge cash position.

"Before I read the letter, I like to think, 'What could surprise me?,'" says David Rolfe, chief investment officer at Wedgewood Partners in St. Louis. "There haven't been a whole lot of surprises in the past few years."

Rolfe, who sold out of a longstanding Berkshire holding in 2019, called the letter a "trip down memory lane" by the 90-year-old Buffett. The CEO discussed the history of long-term Berkshire holdings See's Candies, Nebraska Furniture Mart, and Geico, and gave a nod to a group of Nebraska doctors now around 100 years old who have held Berkshire for more than 50 years.

Berkshire's class A shares, which finished Friday at $364,580, are up 4.7% so far in 2021. The class B stock ended Friday at $240.51. Barron's has written favorably about Berkshire, arguing that the stock looks inexpensive given an attractive valuation at less than 1.3 times year-end 2020 book value and a strong earnings outlook for 2021. Berkshire's operating earnings per share were up 19% in the fourth quarter.

On buybacks, Buffett wrote: "Last year we demonstrated our enthusiasm for Berkshire's spread of properties by repurchasing the equivalent of 80,998 'A' shares, spending $24.7 billion in the process. That action increased your ownership in all of Berkshire's businesses by 5.2% without requiring you to so much as touch your wallet."

"The buybacks are really impressive," says Jim Shanahan, an analyst at Edward Jones with a Buy rating on Berkshire. "It's not what I would have expected a year ago."

Buffett took the blame for Berkshire's ill-fated 2016 purchase for around $33 billion of Precision Castparts, a maker of aircraft parts hard hit by the aerospace downturn. It was the subject of a write-down of more than $10 billion in 2020.

"I paid too much for the company. No one misled me in any way -- I was simply too optimistic about PCC's normalized profit potential. Last year, my miscalculation was laid bare by adverse developments throughout the aerospace industry, PCC's most important source of customers," Buffett wrote. Shanahan noted that Buffett, "always a gentleman, wouldn't throw anybody under the bus" for the deal.

In the past, Buffett has written that if Berkshire can't beat the S&P 500 over time, investors would be better off buying an index fund. Berkshire has trailed the S&P 500 over the past five and 10 years.

Buffett didn't discuss that in the letter or offer a view on whether he thinks Berkshire can beat the S&P 500 in the future.

Among the reasons for the underperformance is Berkshire's inability to find what he has called an elephant-size acquisition to sop up Berkshire's enormous cash holdings, which totaled $138 billion at year-end 2020.

Berkshire also failed to capitalize on the stock market's drop in early 2020 as it was a net seller of about $8 billion of stocks during the year, including airline and financial holdings.

Rolfe would like to see a more prominent role for Todd Combs and Ted Weschler, Berkshire executives who each run an estimated $20 billion of the company's $281 billion equity portfolio.

They are likely to take over the entire portfolio in the post-Buffett era, and are thought to have bought new-economy companies like Amazon.com (AMZN) and Snowflake (SNOW) for Berkshire, while Buffett's two major purchases in 2020 were Chevron (CVX) and Verizon Communications (VZ).

"Buffett loves baseball analogies," Rolfe said. "I would have liked him to have said: 'Ted and Todd have been here for about 10 years and they have proven that they can hit big-league pitching, so I'm promoting them to the big leagues and their new quest is to shrink the number of stocks they own and swing a fat bat so their one or two best ideas will be on our list of largest equity holdings."'

Buffett has praised Combs and Weschler, noting that each has closely matched the S&P 500 with the portfolios they manage and have done better than him.

The CEO, who turned 90 in August, shows no signs of giving up the leadership role that he has had since 1965. It's telling that Berkshire's annual meeting, to be held virtually in Los Angeles on May 1, will feature Buffett and his longtime partner, the 97-year-old Vice Chairman Charlie Munger, who didn't participate in last year's meeting.

Buffett's likely successor as CEO, Greg Abel, a Berkshire vice chairman and head of the company's vast noninsurance operations, will play a secondary role after sharing the stage with Buffett at the company's 2020 virtual annual meeting. Abel and veteran Berkshire insurance executive Ajit Jain will be available to answer shareholder questions at the meeting about their operations.

"And now -- drum roll, please -- a surprise," Buffett wrote. "This year our meeting will be held in Los Angeles...and Charlie will be on stage with me offering answers and observations throughout the 31 2-hour question period. I missed him last year and, more important, you clearly missed him."

This could be one of the last meetings that the legendary pair share the stage, given their advanced age, and most shareholders likely will relish the opportunity to see them together even if it means giving short shrift to the next generation of leadership.