Wednesday , November 25 2020

Warren Buffett defends himself, without answering questions about Berkshire Hathaway

Warren Buffett would have lost his mojo? The traditional letter that the US star 88, investor will send his shareholders every year harder to write, at the beginning of this year. His Berkshire Hathaway fund proved a tax year in 2018, marked by great variations in the value of his holdings in Apple, Wells Fargo and Kraft Heinz.

The last difficulties that are going to the crisis have led to an unusual net fourth quarter loss for Berkshire Hathaway, $ 25.4 billion. Over the year, net profits dropped to $ 4 billion, against $ 44.9 billion in 2018, where the result was inflated by the tax reform. Therefore, Warren Buffett prefers to concentrate on another, favorable variable, the active result. And higher over the year, from $ 3.3 billion in 2017 to $ 5.7 billion in 2018, thanks in particular to its investments in rail and energy.

However, Berkshire's investment performance is above the S & P 500 average over the year. The book value of its securities rose 0.4% in 2018, while 2.8% of the market price rose, when the S & P 500, which comprises the largest 500 companies in the United States, lost 4.4%. %.

Under pressure fund

Those who scrutinize the annual letter to disclose clues about their estate will be disappointing. Warren Buffett expresses his satisfaction with the work of his assistants, Ajit Jain and Greg Abel, who were appointed a year ago, the first on top of insurance activities, the second responsible for other activities, but not making a choice. "Berkshire is running a lot better today than I was when I was alone," said the investor.

The letter does not respond to guessing about the future of cash raised by Berkshire Hathaway. It is now 112 billion dollars, above the 100 billion mark for the sixth quarter in a row. Although the performance of the fund does not exceed the S & P 500 and Berkshire has not carried out any major operations over the last three years, Warren Buffett and assistants are under pressure.

The investor states in his letter that he is still searching for a "huge acquisition" (from "elephant size", literally). He intends to "move the most cash to activities that Berkshire will hold them permanently," but notes that prices are still too high at present. In 2018, he focused on smaller marks, spending $ 1 billion on acquisitions, compared to $ 2.7 billion in 2017. In the meantime, the fund continues to buy its own shares, for $ 400 million in the fourth quarter, compared to 928 million the previous quarter.

Political messages

Finally, Warren Buffett takes advantage of this letter, like every year, to present some economic and political reflections. One of the messages this year is confidence in the US economy, which is put in perspective over the past decades – made its first investment at 11, 1942. "Charlie [Munger, l’autre fondateur de Berkshire, NDLR] and I acknowledge that our success is largely owed to what we would call backward ventures. He would go beyond the honor of a company or individual claiming he had done alone, "said Buffett, who, however, remembers that "Americans are more prosperous and safe if all nations succeeded. In Berkshire, we hope to invest substantial amounts abroad. "

Nicolas Rauline

New York Office

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