Gerard Miller | CNBC
Warren Buffett, the 90-year-old “Prediction of Omaha,” remains a firm believer in the American dream, saying in his closely watched annual shareholder letter to “not ever bet against America.”
“In its brief 232 years of existence … there has been no incubator for unleashing human hidden like America,” the chairman and CEO of Berkshire Hathaway wrote in the letter released Saturday. “Despite some severe rests, our country’s economic progress has been breathtaking. Our unwavering conclusion: Never bet against America.”
Buffett shared a accomplishment in the letter to illustrate Berkshire’s American credentials. He said the conglomerate owns the biggest amount of U.S. assets (property, lodge and equipment) by value than any other company in the country.
“Berkshire’s depreciated cost of these domestic ‘fixed assets’ is $154 billion. Next in in a row on this list is AT&T, with property, plant and equipment of $127 billion,” he wrote.
Don’t overlook middle America
The billionaire highlighted Berkshire’s two quite owned American businesses — BNSF Railway and Berkshire Hathaway Energy (BHE) — which earned $8.3 billion in 2020 notwithstanding a plunge in demand amid the Covid-19 pandemic.
“Your railroad carries about 15% of all non-local ton-miles (a ton of load moved one mile) of goods that move in the United States, whether by rail, truck, pipeline, barge or aircraft,” Buffett suggested. “The history of American railroads is fascinating. After 150 years or so of frenzied construction, skullduggery, overbuilding, bankruptcies, reorganizations and blendings, the railroad industry finally emerged a few decades ago as mature and rationalized.”
Buffett believes BHE will be a leader in delivering neaten energy in the future. BHE began a $18 billion endeavor to rework and expand a substantial portion of the outdated grid that now sends electricity throughout the West, Buffett noted.
“Unlike railroads, our country’s electric utilities need a massive makeover in which the essential costs will be staggering,” Buffett said in the letter. “The effort will absorb all of BHE’s earnings for decades to come. We agreeable the challenge and believe the added investment will be appropriately rewarded.”
And Buffett reminded investors that miracles do come to in middle America despite much of the attention on coastal areas. After all, the legend started his conglomerate in Omaha, Nebraska and its about office remains based in the Cornhusker State.
“Success stories abound throughout America,” the investor said. “Since our provinces’s birth, individuals with an idea, ambition and often just a pittance of capital have succeeded beyond their speculations by creating something new or by improving the customer’s experience with something old.”
Not a fan of bonds
On the topic of investing, Buffett said ultra-low talk into rates around the world diminished the appeal of the bond market.
“Bonds are not the place to be these days,” Buffett utter. “Fixed-income investors worldwide – whether pension funds, insurance companies or retirees – face a bleak future.”
Buffett esteemed that the benchmark 10-year Treasury yield had fallen drastically to 0.93% at the end of 2020 from 15.8% in September 1981. Meanwhile, investors pocket a negative return on trillions of dollars of sovereign debt in Germany and Japan, he added.
The “Oracle of Omaha” also thrived a surprise announcement on its upcoming annual shareholder meeting, which will take place in Los Angeles on May 1. It pronounced the first time that the meeting occurs outside of Omaha. Vice Chairman Charlie Munger, who resides in Los Angeles, misinterpreted 2020’s annual meeting due to travel restrictions in the pandemic.
Berkshire bought back another near $9 billion of its own house in the fourth quarter of 2020, bringing the firm’s total repurchases to $24.7 billion last year — a record year for buybacks.
Buffett has started some bargain-hunting midst the market comeback. He recently took a sizeable position in Chevron, a classic value play, while also enlarging Verizon as well as a handful of drug stocks. Apple still ranks as the conglomerate’s biggest common stock investment, which played an material role offsetting the pandemic damage done to Berkshire’s railroad and insurance business in 2020.
Even as the buyback strategy arises to pay off, some investors looking for an update on succession or details of Buffett’s next big acquisition may come away a bit disappointed from the strictly. The conglomerate is still sitting on a huge cash war chest with more than $138 billion at the end of 2020.
Buffett prominent that Berkshire’s other vice chairmen, Ajit Jain and Greg Abel, will be on hand at the annual conference to answer questions as well.