Billionaire investor Warren Buffett is cautioning investors in his Berkshire Hathaway conglomerate not to expect the “eye-popping performance” of its past, due to a dearth of deals at attractive valuations.
The handful of U.S. companies capable of truly moving the needle at Omaha, Nebraska-based Berkshire have already been picked over, and there are no meaningful acquisition targets outside the U.S., Buffett noted in his company annual shareholder letter, released on Saturday.
But Berkshire is prepared to pounce should a large-scale opportunity arise, with its cash reserves rising to a record $167.6 billion in the fourth quarter.
“By both luck and pluck, a few winners have emerged from a great many dozens of decisions. And we now have a small cadre of long-time managers who never muse about going elsewhere and who regard 65 as just another birthday,” the 93-year-old Buffett said in his yearly missive, one of the most-read reports in business.
Buffett began with a tribute to Charlie Munger, who died in November just 33 days shy of his 100th birthday.
“Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades,” Buffett relayed of his longtime investing partner. “In reality, Charlie was the ‘architect’ of the present Berkshire, and I acted as the ‘general contractor’ to carry out the day-by-day construction of his vision.”
Berkshire’s already established succession plan calls for vice chairman Greg Abel to replace Buffett as CEO and two other investment managers to take charge of its stock portfolio. In charge of Berkshire’s noninsurance businesses since 2018, Abel “in all respects is ready to be CEO of Berkshire tomorrow,” Buffett wrote.
Berkshire’s insurance businesses fared well last year as utilities fell short, Buffett noted.
The regulatory climate and climate change is making it difficult to project earnings and asset values in utilities, formerly among the most stable industries, he noted.
Buffett said he intends to retain his nearly 30% stake of Occidental Petroleum “indefinitely” but has no plans to own or run the company. He cited Occidental’s “vast oil and gas holdings in the United States,” and leadership in carbon-capture initiatives as in the nation’s interest.
He also hiked Berkshire’s stake in five large Japanese trading houses, saying all “follow shareholder-friendly policies that are much superior to those customarily practices in the U.S.”
Further, “the managements at the five have been far less aggressive about their own compensation than is typical in the United States,” Buffett wrote of Marubeni, Mitsubishi, Mitsui and Sumitomo.
Kate Gibson is a reporter for CBS MoneyWatch in New York.
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