Podcast & Book Reviews

April 4, 2022

Book Review | Warren Buffett’s 2021 Shareholder Letter

By Nelson DeMestre | Associate Analyst at NAOS Asset Management

“Please note particularly that we own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers”

The Berkshire Hathaway 2021 Annual Report to Shareholders was released in the early hours (Sydney) of Sunday the 27th February, providing a genuinely interesting read. Buffett noted that there was little “new or interesting” at BRK over the year, yet did provide some insights into where the business stands today.

Remarkably, Buffett revealed in his letter:

• Berkshires valuable insurance float has grown from $19 million (1967) to $147 billion today

  • These funds have cost BRK “less than nothing”, yet have been available for investment to Warren and Charlie, adding extreme fuel to their compounding capabilities.

• Cash….BRK holds $144 billion of Cash (and Cash Equivalents) on its balance sheet.

  • $120 billion of which are US Treasury Bills (maturing in less than a year)
  • These bills means BRK finances from ½ to 1% of all publicly held national debt!
  • Why do they hold so much? It’s a “a consequence of my failure to find entire companies or small portions thereof (that is, marketable stocks) which meet our criteria for long term holding.”

• Infrastructure

  • BRK now owns and operates more US-based infrastructure assets than any other American corporation, which would surprise most investors who may view the company as an investment vehicle that simply happens to own a collection of adjacent private businesses.

Finally, the listed Portfolio breakdown is interesting, particularly as its highlights BRKs move into Japanese trading houses and the large appreciation of Chinese EV manufacturer BYD Co. Ironically, BRK has faced criticism in the past for neglecting technology investments in favour of ‘old-world’ industries (Banks, Consumer Staples etc), yet the extreme concentration in Apple Inc (not on cost but on appreciation), directly disputes this.

warren buffet review pic

Link to Letter


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