FILE PHOTO: Berkshire Hathaway Chairman Warren Buffett walks through the exhibit hall as shareholders gather to hear from the billionaire investor at Berkshire Hathaway Inc’s annual shareholder meeting in Omaha, Nebraska, U.S., May 4, 2019. REUTERS/Scott Morgan
February 22, 2020
By Jonathan Stempel and David Randall
NEW YORK (Reuters) – Warren Buffett on Saturday defended Berkshire Hathaway Inc’s decision to invest heavily in the stocks of companies such as Apple Inc, while giving new details about how Berkshire Hathaway is prepared for his death in an annual letter to shareholders posted on the company’s website.
The letter, which is widely read on Wall Street, came as Berkshire Hathaway posted record full year earnings of $81.42 billion that nearly doubled its previous record from 2017, largely as a result of accounting rule changes that require the company to report paper gains and losses from its stock holdings with net income even if it sells nothing.
Despite those gains, Berkshire Hathaway’s stock has underperformed the broad U.S. stock market by gaining 11.7% over the last 12 months, compared with a 20.3% gain in the S&P 500 over the same time. Shares of the company are up 1.3% for the year to date.
In his letter, Buffett focused on his company’s investments in the stock of companies such as Apple at a time when the conglomerate has struggled to find whole companies to buy, while also highlighting the growth of its core insurance businesses.
Buffett noted that the returns in the insurance businesses were especially strong compared with the low yields on long-term U.S. Treasuries.
“What we can say is that if something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low level businesses now enjoy, it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments,” Buffet wrote.
The 89-year-old assured that Berkshire is prepared for the eventual departures of himself and Vice Chairman Charlie Munger, 96.
“Charlie and I long ago entered the urgent zone,” Buffet wrote. “That’s not exactly great news for us. But Berkshire
shareholders need not worry: Your company is 100% prepared for our departure.”
Buffett gave new details about what will happen to his shares in the company after his death, noting that he expects that it will take 12 to 15 years for his estate to fully liquidate his position in the company.
In that time, he wrote, “I myself feel comfortable that Berkshire shares will provide a safe and rewarding investment during the disposal period.”
(Reporting by Jonathan Stempel and David Randall in New York; Editing by Frances Kerry and Franklin Paul)
