Berkshire Hathaway (BRK-B, BRK-A) CEO Warren Buffett defended his company’s growing cash pile, reflected on mistakes, and again touted what he called the “American miracle” of US economic growth over the last two centuries as the conglomerate reported record operating earnings of $47.4 billion last year.
Writing in his 2024 annual letter to Berkshire shareholders published Saturday, Buffett said these record profits came despite more than half (53%) of the company’s operating businesses reporting a decline in earnings last year.
“In 2024, Berkshire did better than I expected though 53% of our 189 operating businesses reported a decline in earnings,” Buffett wrote. “We were aided by a predictable large gain in investment income as Treasury Bill yields improved and we substantially increased our holdings of these highly-liquid short-term securities.”
At the end of the year, Berkshire’s pile of cash and other cash-like securities, such as Treasury Bills, stood at $212.6 billion, almost double the $121.8 billion seen at the end of 2023. The value of Berkshire’s equity portfolio stood at $272 billion at year-end; at the end of 2023, these holdings were valued at $354 billion.
Major sales of Berkshire’s stake in Apple (AAPL) during the first, second, and third quarters of 2024 saw the value of its holdings in the tech giant fall by about $100 billion.
Berkshire Hathaway Chairman Warren Buffett attends the Berkshire Hathaway Inc annual shareholders’ meeting in Omaha, Nebraska, U.S., May 3, 2024. REUTERS/Scott Morgan ·REUTERS / Reuters
“Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities,” Buffett wrote Saturday. “That preference won’t change.
“While our ownership in marketable equities moved downward last year from $354 billion to $272 billion, the value of our non-quoted controlled equities increased somewhat and remains far greater than the value of the marketable portfolio.
“Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities — mostly American equities although many of these will have international operations of significance.”
For the full-year 2024, Berkshire’s total revenues reached $371.4 billion, up from $364.5 billion the prior year. Its investment gains tallied $41.6 billion, down from $58.9 billion in 2023 and reflecting how these numbers can, to use Buffett’s words, “swing wildly and unpredictably” from year to year. The company’s $47.4 billion operating profit excludes its investment portfolio’s gains or losses.
Berkshire’s reported net earnings inclusive of its investment gains tallied $89 billion last year, down from $96.2 billion in 2023.
At the top of this year’s annual letter, Buffett began with reflections on the many mistakes made at Berkshire Hathaway over the years, but kept his comments general on the advice of the late Tom Murphy: “praise by name, criticize by category.”
“Sometimes I’ve made mistakes in assessing the future economics of a business I’ve purchased for Berkshire – each a case of capital allocation gone wrong. That happens with both judgments about marketable equities — we view these as partial ownership of businesses — and the 100% acquisitions of companies.
“At other times, I’ve made mistakes when assessing the abilities or fidelity of the managers Berkshire is hiring. The fidelity disappointments can hurt beyond their financial impact, a pain that can approach that of a failed marriage.”
“During the 2019-23 period, I have used the words ‘mistake’ or ‘error’ 16 times in my letters to you,” Buffett added. “Many other huge companies have never used either word over that span.”
Buffett added that, given his advanced age, it “won’t be long” before Greg Abel takes his place as CEO and writes annual letters to Berkshire shareholders.
“Greg shares the Berkshire creed that a ‘report’ is what a Berkshire CEO annually owes to owners,” Buffett wrote. “And he also understands that if you start fooling your shareholders, you will soon believe your own baloney and be fooling yourself as well.”
In reference to Berkshire’s current investments, Buffett also noted some of the “disappointments” that populate that portfolio.
“We own nothing that is a major drag,” Buffett wrote, “but we have a number that I should not have purchased.”
Buffett, as he has done in recent years, also boasted of Berkshire’s tax outlays and touted the US economic tailwind that has benefited him and his businesses as an investor and operator.
In this year’s letter, Buffett noted the $26.8 billion in taxes paid by Berkshire this year is the most any individual company has ever paid to the US government.
“To be precise, Berkshire last year made four payments to the IRS that totaled $26.8 billion. That’s about 5% of what all of corporate America paid,” Buffett wrote.
“In a very minor way, Berkshire shareholders have participated in the American miracle by foregoing dividends, thereby electing to reinvest rather than consume,” Buffett wrote.
“Originally, this reinvestment was tiny, almost meaningless, but over time, it mushroomed, reflecting the mixture of a sustained culture of savings, combined with the magic of long-term compounding.
“Berkshire’s activities now impact all corners of our country. And we are not finished… Someday your nieces and nephews at Berkshire hope to send you even larger payments than we did in 2024. Spend it wisely.”
In addition to commentary on Berkshire’s businesses and other investment topics, Buffett’s letter has become more closely watched for the changes in the company’s sprawling annual meeting, typically held on the first weekend in May.
This year’s edition, set for May 3, will feature “a somewhat changed schedule,” Buffett wrote on Saturday, with the famed Q&A session starting and ending earlier.
Buffett will be joined once again by Berkshire vice chairmen Greg Abel — Buffett’s heir apparent — and Ajit Jain for two-and-a-half hours starting at 8:00 a.m. After a short break, only Abel will join Buffett on stage, with the Q&A session wrapping up by 1:00 p.m.
In years past, Buffett’s Q&A with shareholders has stretched towards 3:00 p.m. local time; in 2020, the Q&A ran well into the night.
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