Warren Buffett released his much-anticipated annual letter to investors last Saturday. Every year, investors pore over the billionaire CEO of Berkshire Hathaway’s words, hoping to glean some wisdom from an investor with a remarkable track record. After a year like no other, the appetite for his insights was particularly strong.

Despite contentious presidential elections, nationwide protests, a record-breaking run for stocks, all amid a global pandemic, Buffett was uncharacteristically quiet throughout the chaos of 2020. On Saturday, he broke his silence. While he shied away from political commentary, he encouraged shareholders to have faith in the idea of America.

“In its brief 232 years of existence, however, there has been no incubator for unleashing human potential like America. Despite some severe interruptions, our country’s economic progress has been breathtaking,” he wrote.

“We retain our constitutional aspiration of becoming ‘a more perfect union.’ Progress on that front has been slow, uneven and often discouraging. We have, however, moved forward and will continue to do so. Our unwavering conclusion: Never bet against America,” he added.

Given the tumultuous times America is experiencing, Buffett’s letter left some investors thirsty for more.

“I think what was notable was the fact that given everything that’s gone on in this country from the pandemic to all the social unrest to the social inflation and climate change that’s impacting the insurance industry. It was striking to me that none of that was mentioned in the letter,” CFRA Research analyst Cathy Seifert said. 

Instead, Buffett focused on the strength of Berkshire’s portfolio, a collection of iconic American businesses. He flagged the company’s $120 billion stake in Apple as one of its most valuable assets. Equating to a 5.4% non-controlled stake in the company, it rivals Berkshire’s almost fully-controlled railroad and utility divisions. 

He encouraged readers to invest in companies based on their “durable strengths, the capabilities and character of its management, and price” rather than “investing illusions”.

He did, however, admit he still makes mistakes. Last year, Berkshire faced a $10 billion writedown of aviation parts manufacturer Precision Castparts. He expressed his regrets about paying $32.3 billion for that business.

“No one misled me in any way – I was simply too optimistic about PCC’s normalised profit potential,” Buffett said. “Last year, my miscalculation was laid bare by adverse developments throughout the aerospace industry, PCC’s most important source of customers,” he wrote.

Nonetheless, Buffett’s philosophy of long term investment in well-respected companies appears prudent, even in a year like no other. The company’s fourth quarter profits grew 23% and its operating earnings by 14%.

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 Past performance is not a reliable indicator of future performance.

Sources:

• Live Wire, The 5 key takeaways from Warren Buffett’s annual shareholder letter
• The Sydney Morning Herald, ‘Never bet against America’: Warren Buffett’s bullish letter to shareholders