Jonathan Stempel

(Reuters) – Warren Buffett signaled Saturday that he’d stick with his knitting and bemoaned the absence of investment opportunities at Berkshire Hathaway Inc. (NYSE) Inc sits on a large pile of cash despite repurchasing vast amounts of its own stock.

The 91-year old billionaire, who is also a Berkshire shareholder, expressed his confidence in Berkshire in a widely read annual letter. He stated that Berkshire’s emphasis on stocks and strong business investments benefits those with the same long-term goals.

Buffett stated that people who feel comfortable investing will achieve greater results than those motivated by changing headlines, chatter, and promises.

Berkshire is concerned about the potential for changes in global politics, terrorism, and cyberattacks.

It repurchased $51.7 billion worth of stock in 2020 and 2021 to increase its value. Buffett claimed that there is little to be excited about in the stock market and major acquisitions are difficult after six years.

He wrote, “Today’s internal opportunities offer far greater returns than acquisitions.”

In 2021, many of these opportunities paid off.

Operating profit rose 25%, to $27.46 Billion. More than one third of that came from Berkshire Hathaway Energy and the BNSF Railroad. The fourth quarter saw an increase in operating profit of 45%.

Record-breaking full-year net income grew to $89.8billion, thanks in large part to gains by Apple Inc (NASDAQ;) and Bank of America Corp. (NYSE:). American Express The stock Co (NYSE:), and the other stocks that make up Berkshire’s large investment portfolio.

As of December 31, the Apple stake was worth $161.2 billion, more than five times what $31.1 billion Berkshire had paid.

The record for stock buybacks was $27Billion in 2021. Buffett also stated that Omaha, Nebraska-based Berkshire had repurchased an additional $1.2B of its stock by 2022.

“He is offering a story of a multifaceted growth engine,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania and longtime Berkshire investor. “The main message is that Berkshire’s found many remarkable businesses. So let’s rejoice them.”

‘FOUR GIANTS’

Buffett opened his letter by highlighting Berkshire’s “four giants”, which he described as its huge insurance operations and Berkshire Hathaway Energy. He also highlighted the Apple stake.

Buffett said, “Our goal was to make worthwhile investments in businesses that have both long-term economic benefits and a CEO of the highest caliber.”

Berkshire is also a fan of an “old-fashioned kind” earnings, which included $6 billion in last year’s earnings at its BNSF railroad. He said this to be a shade on companies that manipulate their results for stock price increases.

Buffett stated that deceptive earnings ‘adjustments,’ for the sake of politeness–have become more common and more absurd as stock prices have risen. Buffett said, “Bull markets are the breeding ground for bloviated bull ….”.”

Berkshire closed last year with $16.7 billion in cash and other equivalents. It isn’t a record, but very close.

Buffett said he would keep $30 billion more in his possession, after long stating that $20 billion was sufficient.

It is done in part because Berkshire needs to be protected against potential losses from its insurance operations. These include Geico, a car insurer, and a business that insures against large catastrophes such hurricanes.

The more than 90 companies that make up the group include Dairy Queen, Sees candies, and several industrial businesses like Precision Castparts. Precision Castparts was an important aircraft parts producer hit hard by pandemic.

Berkshire said that it will hold the Omaha shareholder weekend, which includes the annual meeting on April 30, for the first ever time since 2019.

Buffett describes the week as Woodstock for Capitalists. It typically hosts about 40,000 people, who shop, dine, run 5 kilometers, and participate in other events.

For the Annual Meeting to be valid, proof of COVID-19 immunity will be needed.