Rick Wilking/Reuters
- Warren Buffett's letter to shareholders on Saturday included plenty of tasty tidbits.
- It pegged Berkshire Hathaway's return under Buffett at 4,400,000% versus the S&P 500's 31,000%.
- Berkshire is making bank on bonds, and its $168 billion cash pile is worth more than Uber or Nike.
Warren Buffett published his annual letter to Berkshire Hathaway shareholders on Saturday, a tradition that stretches back nearly six decades.
The famed investor's latest missive and full-year report were full of juicy nuggets for close readers. Here are six of the best.
1. Crushing the market
As of December 31, Berkshire stock was up nearly 4,400,000% since Buffett took control in 1965. That's about 140 times the S&P 500's 31,000% gain over the same period, and represents a compounded gain of 19.8% a year versus the index's 10.2% annual gain.
Berkshire has jumped a further 16% this year, surpassing the S&P's 7% advance and extending its lead over the index. If you'd invested $100 with Buffett at the start of his Berkshire tenure, you'd now be worth well over $400 million.
2. Assets aplenty
Berkshire held $561 billion of net assets at the end of December, a 19% increase from a year earlier.
Buffett said that was the largest net asset figure recorded for any American business, and it was equivalent to 6% of the total worth of the S&P 500 of $9.5 trillion in 2022.
Berkshire's $1 trillion-plus of assets included $354 billion of stocks, $178 billion of property and equipment, $130 billion of Treasury bills, and $24 billion of inventories.
The company's near-$500 billion of liabilities included unpaid losses, unearned premiums, and healthcare benefits in its insurance and other businesses.
3. Money to burn
Berkshire's mountain of cash and short-term investments swelled to a record $168 billion by December 31, about a $60 billion increase in only 15 months.
That figure is larger than the value of General Electric ($167 billion), Comcast ($166 billion), Uber ($162 billion), Nike ($160 billion), Walmart ($159 billion), American Express ($156 billion), or Pfizer ($155 billion).
4. Cash positive
Buffett and his colleagues have struggled to find bargains in recent years as stocks have marched to record highs, fierce competition from private equity firms has made acquisitions more costly, and Berkshire's rising stock price made buybacks less attractive.
The upshot is that on December 31, Berkshire held $354 billion of stocks, and $168 billion of cash and other short-term investments — a ratio of nearly 2:1.
Buffett has long said he vastly prefers to own productive assets like stocks and businesses instead of dollars or bonds, so the fact that cash and Treasuries made up nearly a third of Berkshire's portfolio is striking.
5. Renewed interest
Berkshire raked in about $6.1 billion of interest and other investment income last year — some 10 times the $589 million it collected in 2021, and more than the $5.5 billion of dividends in 2023.
Buffett and his team primarily attributed the massive surge to higher interest rates. In response to historic inflation, the Federal Reserve raised its benchmark rate from virtually zero to more than 5% between the spring of 2022 and last summer, which boosted the yields on government bonds.
Berkshire previously made a negligible amount of interest on its cash and bonds, but now that's changed it can earn a solid return on them while Buffett continues its hunt for great businesses to own.
6. Tiny headquarters
Berkshire's total workforce grew to nearly 400,000 employees last year, but only 26 of them worked in the company's Omaha headquarters.
That's because the late Charlie Munger, who Buffett hailed as the "architect" to his "general contractor," structured Berkshire as a decentralized, autonomous web of subsidiaries.
Berkshire-owned businesses ranging from Geico (30,584 employees) to Pampered Chef (309) effectively operate independently and simply send their profits to HQ.
The system allows the investor to focus on what he does best: allocating capital within and outside his company, and leaving day-to-day management to others.