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Buffett’s letter to break months of silence amid the turmoil in the United States

(Bloomberg) – While 2020 was raging, Warren Buffett mostly kept his tongue out. He stayed calm during a heated presidential election, a racist reckoning that sparked nationwide protests, and an exuberance for stocks that gripped millions of Americans. Not to mention a global pandemic. Now the Berkshire Hathaway Inc. billionaire board of directors has an opportunity to break their silence with the release of its annual letter on Saturday: “If this letter doesn’t address some of the issues, people will be disappointed,” said Cathy Seifert, an analyst at CFRA Research said in a telephone interview. “There is an appetite for his thoughts.” The letter is an annual tradition for the 90-year-old CEO, an opportunity to share wisdom with his loyal following of value investors. And Buffett usually doesn’t shy away from sharing this wisdom, and has even championed controversial politicians like Hillary Clinton in the past. His annual letter before the 2016 presidential election touched politics and accused the candidates of beating the drumbeat negatively. It has been different since he spoke at the annual meeting last May when he said his near-record-breaking stacks of cash were not as big as taking into account the “worst-case” possibilities of the Covid-19 pandemic. The CEO has shared few of his opinions since then, even last year when President Joe Biden and former President Donald Trump faced each other in one of the most controversial elections in US history. In the 2020 letter, the issue was not mentioned: “Perhaps he just decided that there was no advantage in getting into this fight,” said Seifert. “He was a little more open than the general discourse was much more polite, and I can certainly understand the desire to pack your tent and go home and not participate. It is no longer a board game. It’s a blood sport. “Long list If he does decide to weigh up, there are plenty of topics to explain. How did he see the uprising in the US Capitol in early January? What did he say to Biden during his conversation a few weeks before the election? What should investors think of the recent drama with GameStop Corp. short sellers? and hold other stocks? How about the emerging stock market? And how should companies tackle racial inequality? His business partner Charlie Munger did not shy away from speaking about stock market speculation on Wednesday at the annual meeting of the Daily Journal Corp., of which he is chairman. He beat up brokers like Robinhood Markets Inc., saying that they essentially provide gambling services – a “dirty way” of making money. There are also other questions for Buffett. Although Buffett easily beaten the S&P 500 at the top of Berkshire for more than 50 years, he has lagged the index for at least a decade. And his cautious stance at Berkshire’s annual meeting last May raised questions from some who wanted him to be more aggressive with new investments. However, investors like Darren Pollock said the strategy was admirable in hindsight, given Buffett Berkshire’s “Fort Knox” balance sheet. ” The fact that he was more cautious was perfectly fine, “said Pollock, portfolio manager at Cheviot Value Management LLC, which Berkshire counts as its largest holding.” Better to miss an opportunity and stay in a great financial position than to take a big swing and swing and miss and strike. “Berkshire is plagued by its size too. The company has grown so big that only massive acquisitions can move the needle. Given the high prices and competition from buyers like private equity firms, however, they were hard to find – even the company’s $ 6 billion Japanese stock purchases last year would only represent 4% of Berkshire’s cash stacks by the end of the third quarter. Now Buffett can catch the latest boom at SPACs or special-purpose acquisition companies as an additional competitor who oversees the dealmaking area hwemmt: “Right now there are so many things that I think the market would benefit from in terms of their wisdom,” said Jim Shanahan, an analyst at Edward D. Jones & Co. said in a telephone interview. He listed the rise of SPACs as well as “GameStop, Short Selling, Reddit, and the entire episode. But just things like the stock’s underperformance, inflation, the stimulus – the size, and maybe the need for another stimulus. “It’s a long list. Here are more topics that could crop up on Saturday: Succession – While Buffett has given no indication that he is stepping down anytime soon, investors are always on the lookout for clues as to how the non-agent is doing. He often uses the letter to joke and reassure investors. Last year Buffett said he and 97-year-old Berkshire Vice Chairman Munger entered the “urgency” zone long ago about their ages. But he tried to reassure investors that the company will be well prepared when the couple finally leaves. In fact, the company’s future has been telegraphed for some time. Buffett named Greg Abel and Ajit Jain as vice chairmen in 2018, promotions that have been labeled “part of the movement towards succession.” He promised to give the couple more platform to ask questions at last year’s annual meeting, but that changed when Covid-19 forced the meeting into a virtual format and restricted the attendance of Buffett and Abel, who are closer to Omaha, Nebraska, where Berkshire is located. Pollock said investors would benefit if Buffett used Saturday’s letter to tell more about the impact of his investment on MPs, Todd Combs and Ted Weschler. One of them was the key to Berkshire’s Apple Inc. bet, now considered the company’s largest common stock investment. However, the company does not typically disclose which executive is responsible for a particular investment. However, Combs and Weschler are known to have pushed Berkshire into more tech-oriented opportunities, such as its recent investment in cloud computing company Snowflake Inc. All of the MoneyBuffetts have been blessed with one high-profile problem in recent years: too much money. Berkshire is drawing in more and more funds than its CEO can quickly invest in high-yielding assets, resulting in over $ 145 billion in cash by the end of September. While he didn’t complete any of the “elephant-sized” acquisitions he longed for, Buffett was still active and investing last year. Berkshire ventured into Japan by listing the stocks of various trading companies. The company has also purchased some natural gas plants from Dominion Energy Inc. Most recently, Berkshire acquired approximately $ 4.1 billion in Chevron Corp. for months. and acquired a $ 8.6 billion stake in Verizon Communications Inc. What Bloomberg Intelligence Says: “We believe the record buyback of stocks of 2020 reflects a lack of other options and Buffett’s conservatism in uncertain times. The company would take a big deal to improve results. – Matthew Palazola, Senior Analyst The Chevron and Verizon bets are more lucrative ways for Berkshire to park some of its cash instead of holding more Treasury bills, according to Pollock. Chevron and Verizon are among the top three common stock bets in Berkshire with the highest dividend yield, according to Bloomberg. Even so, Buffett largely stays in familiar areas. Berkshire knows the power room well and had previously bet on Verizon. One of his biggest purchases last year was on the conglomerate’s own lawn: buying Berkshire stocks. That cost around $ 15.7 billion in the first nine months of 2020 and was already a record year for buybacks. The signs point to even more buybacks in the fourth quarter. A message shows that by the end of October he had bought back enough shares to bring the total annual amount to at least $ 18 billion. “If he had made a $ 18 billion acquisition, we would have called it sizeable,” said Edward Jones Shanahan. The total buybacks last year through late October are “very significant,” despite the fact that Shanahan.MarketsBuffett said the company did Was asked about its buybacks for almost a year for the first time as it cannot buy back due to a lack of liquidity in Berkshire stocks Beat up in early April. Buffett, who told investors to be greedy when others are scared, remained unusually cautious during those first few months, even ditching airline stocks and claiming that the world has changed for this industry. US stocks largely rebounded in the later months of 2020, rising earlier this year with the Reddit-induced Mania around certain stocks like GameStop continues. Buffett’s loyal investment fans may want to know what he thinks of the recent market upheaval, depending on whether he wrote this year’s letter before or after the phenomenon occurred. The newfound exuberance of retail investors dates back to the dot-com bubble mania in 2001 When Buffett derided some investors’ understanding of the market in a way that he could easily revive 20 years later: “It was like a virus” , Buffett wrote in his annual letter published earlier this year, “The rampage among both investment professionals and investment professionals caused hallucinations in which the values ​​of stocks in certain sectors have become decoupled from the values ​​of the companies that underlie them. “For more articles like this, visit bloomberg.com. Subscribe now to keep up with the most trusted business news source © 2021 Bloomberg LP