OMAHA, Neb. — In his annual letter to shareholders issued on Saturday, Warren Buffett reflected on the achievements of Berkshire Hathaway over the past year and the six decades since he transformed a struggling New England textile firm into a major conglomerate. He also offered thoughts directed towards President Donald Trump.
Buffett began his correspondence by recognizing his own occasional missteps throughout his career, though he refrained from detailing any specific instances. He expressed confidence in Greg Abel, whom he has designated as his successor at the helm of the company, stating that Abel will be quick to recognize substantial investment prospects and will maintain the tradition of writing annual reports for shareholders. Buffett’s letters are a go-to for investors due to the valuable insights he provides, coupled with his exemplary track record.
Unlike a decade ago when he and his long-time investment partner Charlie Munger reflected on their lengthy tenure as leaders, this letter did not delve deeply into Buffett’s time as CEO. However, in recognition of the 60th anniversary, Berkshire is set to release a special book during the upcoming annual meeting, featuring anecdotes and lessons learned from the company’s journey.
Buffett pointed out that when he acquired Berkshire in 1965, the corporation had not paid any income tax in the preceding decade—a red flag for a sound investment. However, as Berkshire has flourished, its tax contributions have escalated, reaching $26.8 billion last year, exceeding anything the U.S. government had received from any single company, including the major American tech firms.
While Buffett typically avoids political commentary to protect Berkshire’s interests, he encouraged responsible fiscal management from the government regarding the substantial payments made by the company. He wrote, “Thank you, Uncle Sam. Someday your nieces and nephews at Berkshire hope to send you even larger payments than we did in 2024. Spend it wisely. Take care of the many who, for no fault of their own, get the short straws in life. They deserve better,” showcasing some ideals he has long supported.
According to CFRA Research analyst Cathy Seifert, this message was subtle yet powerful.
Buffett indicated that once Greg Abel steps into his role as CEO, he will inherit significant resources, as Berkshire currently holds $334.2 billion in cash. This amount nearly doubled compared to the $167.6 billion from the previous year, attributed to selling portions of Apple and Bank of America stocks, as well as generating income from numerous subsidiaries, including Geico, BNSF Railway, and well-known brands like Dairy Queen and See’s Candy.
Over the past year, Buffett allocated some of the cash by spending $3.9 billion to acquire the remaining interest in a utility business and another $2.6 billion for the remainder of the Pilot truck stop chain. His investments also expanded in five major Japanese conglomerates, and he anticipates further investments there as these companies permitted Berkshire to increase its ownership beyond the 10% threshold. Overall, Berkshire has invested $13.8 billion in Japanese firms, now valued at approximately $23.5 billion.
Despite facing challenges in identifying major acquisitions, Buffett reaffirmed his strategy of reinvesting profits rather than distributing dividends, reasoning that this would yield better long-term returns. Investor Bill Smead of Smead Capital Management suggested that Buffett might be bearish on the market but is reluctant to express this directly.
Portfolio manager Macrae Sykes from Gabelli Funds emphasized that Berkshire’s substantial cash reserves represent a valuable resource, positioning the conglomerate to swiftly capitalize on significant opportunities, even though such occurrences are infrequent.
In addressing company performance, Buffett noted that 2024’s earnings exceeded his projections despite 53% of their 189-owned firms seeing lower earnings. This success stemmed from higher interest collections on short-term investments and improved profits from their insurance operations.
Buffett has always suggested focusing on operating profits rather than bottom-line figures, which can be misleading due to the fluctuating value of investments. In the most recent quarter, Berkshire reported profits of $19.69 billion, down from $37.57 billion a year earlier; however, operating profits improved to $14.5 billion from $8.5 billion the previous year.
Analysts have expressed concern over the overall health of the economy as reflected in Berkshire’s results. They worry that soft performance within Berkshire’s operations could indicate consumer economy weaknesses, especially if trends continue into 2025, with potential losses projected in connection with insurance claims from California’s wildfires.
As a nod to Buffett’s age, he announced that this year’s shareholder meeting in May would be shorter than usual, with sessions running from 8 a.m. to 1 p.m. Buffett also revealed he now uses a cane to assist with mobility. Unlike in previous years, this year’s meeting will not feature a humorous film with celebrity cameos but will offer ample opportunities for attendees to explore products from various Berkshire companies exhibited at the event.
