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Berkshire Hathaway’s dynamic CEO, Warren Buffett, passionately defended the company’s impressive cash reserves while reflecting on past missteps and celebrating what he revels as the “American miracle”—the remarkable economic growth of the US over the past 200 years. This spirited discourse came as the conglomerate announced a staggering record in operating earnings, reaching an astonishing $47.4 billion last year!
Writing in his 2024 annual letter to Berkshire Hathaway shareholders published on Saturday, Buffett highlighted that the company achieved record profits, even with 53% of its operating businesses seeing a drop in earnings last year.
“In 2024, Berkshire performed better than I anticipated, despite the fact that 53% of our 189 operating businesses reported lower earnings,” Buffett stated. “We benefited from a predictable surge in investment income as Treasury Bill yields rose, and we significantly boosted our holdings of these liquid short-term securities.”
At year-end, Berkshire held a staggering $334.2 billion in cash and cash-equivalents, nearly doubling the $167.6 billion at the close of 2023. Meanwhile, the value of Berkshire’s equity portfolio was $272 billion, down from $354 billion at the end of the previous year.
A series of major sales of Berkshire’s stake in Apple (AAPL) during the first three quarters of 2024 led to a decline of roughly $100 billion in the value of its investments in the tech giant.
“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 of 2024, Berkshire’s total revenues reached $371.4 billion, an increase from $364.5 billion in the previous year. The company’s investment gains amounted to $41.6 billion, a decrease from $58.9 billion in 2023, illustrating the volatile nature of these figures, which Warren Buffett has described as capable of “swinging wildly and unpredictably” from year to year. The company’s operating profit, which stands at $47.4 billion, does not include the gains or losses from its investment portfolio.
When including its investment gains, Berkshire’s reported net earnings for last year reached $89 billion, down from $96.2 billion in 2023.
‘I’ve made mistakes’
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.”
An American record
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.”
‘A somewhat changed schedule’
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.
*may contain some excerpts from yahoo finance
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