'Little action,' but 'reasonable progress' increasing intrinsic value Near the top of his annual letter to Berkshire Hathaway shareholders out this morning, Warren Buffett writes that when it comes to what is "new or interesting" at Berkshire, "Alas, there was little action of that sort in 2021."
With low interest rates driving up the prices of "productive" investments, he and Charlie Munger "find little that excites us" in the equity markets.
But, he says, "Fortunately we have had a mildly attractive alternative for deploying capital" that has helped them "make reasonable progress in increasing the intrinsic value of your shares," which has been his "primary duty for 57 years."
That alternative is repurchasing Berkshire shares.
"When the price/value equation is right, this path is the easiest and most certain way for us to increase your wealth."  He reports Berkshire spent $51.7 billion in 2020 and 2021 to buy back 9% of the shares that were outstanding at the end of 2019. "That expenditure left our continuing shareholders owning about 10% more of all Berkshire businesses," both subsidiaries and holdings in the stock portfolio.
It has also bought back $1.2 billion of its stock so far this year.
Buffett stresses, however, "Our appetite remains large but will always remain price-dependent."
In the fourth quarter of last year, Berkshire repurchased $6.9 billion of its stock, a decrease from the $7.6 billion it spent in the third quarter, but enough to bring its 2021 total to a record $27 billion.
That spending contributed to a modest decrease in Berkshire's cash to $146.7 billion as of December 31, down from a record high $149.2 billion as of September 30.
Buffett writes that while Berkshire's $120 billion in U.S. Treasury bills is financing about one half of one percent of the publicly-held national debt, it is "not some deranged expression of patriotism."
He says he and Munger still have an "overwhelming preference for business ownership," although Berkshire will "always" have more than $30 billion in cash to keep the company "financially impregnable." (In the past, Buffett has talked about keeping a $20 billion cash cushion on hand.)
"Charlie and I have endured similar cash-heavy positions from time to time in the past. These periods are never pleasant; they are also never permanent."
Even though he can't find something new to buy, Berkshire's current businesses have been big moneymakers. Fourth quarter operating profits increased 45% to $7.3 billion. For the year, they were up 25% to $27.5 billion.
Also in the letter ...
Annual meeting gets a new streamer In its annual report, Berkshire reveals that CNBC will be webcasting the Q&A session with Buffett, Munger, and vice chairs Greg Abel and Ajit Jain at its shareholders meeting on Saturday, April 30. (Yahoo Finance has been streaming it in recent years.)
Questions will come from shareholders at the meeting and from a selection of those submitted to "Squawk Box" co-anchor Becky Quick at berkshirequestions@cnbc.com.
The company says proof of COVID-19 vaccination will be required to attend the meeting. It has partnered with CLEAR Health Pass to facilitate the process, although using the free service is not required.
Specifics are in a document posted on Berkshire's site.
Additional general information is in this post on the site.
And ever the salesman, Buffett ended his letter with word that "Cousin" Jimmy Buffett will introduce a new pontoon "party" boat the musician designed at the meeting's "Berkshire Bazaar of Bargains." It's being manufactured by Berkshire subsidiary Forest River. Shareholders will be offered a 10% discount "for two days only."
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-- Alex Crippen, Editor, Warren Buffett Watch
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