The conglomerate held $128 billion in cash as of Dec. 31
By Nicole Friedman
Berkshire Hathaway Chairman Warren Buffett, left, and Vice Chairman Charlie Munger at the annual Berkshire shareholder shopping day in Omaha, Neb., last year.
Photo: scott morgan/Reuters .
Warren Buffett sought to reassure investors that his Berkshire Hathaway Inc. BRK.B 0.51%▲ remains in strong shape as Berkshire’s cash pile remained near record highs due to a dearth of large deals.
Berkshire’s earnings surged last year due to unrealized investment gains, but the conglomerate’s cash pile totaled $128 billion as of Dec. 31, the company said Saturday, slightly down from $128.2 billion at the end of the third quarter.
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Mr. Buffett, Berkshire’s chairman and chief executive, has for years lamented the challenge of finding acquisition targets that are large enough to move the needle for Berkshire and are reasonably priced.
While Berkshire has a long history of outperforming the stock market, the company has underperformed the S&P 500’s total return in recent years. The company’s stock rose 11% in 2019, the company said, compared with a 31.5% total return in the S&P 500, including dividends—Berkshire’s biggest underperformance since 2009.
“The opportunities to make major acquisitions possessing our required attributes are rare,” Mr. Buffett said in an annual letter to shareholders also released Saturday.
Nevertheless, he said, shareholders should not be worried about the future of Berkshire after the 89-year-old Mr. Buffett or his 96-year-old business partner, Berkshire Vice Chairman Charlie Munger, die. “Your company is 100% prepared for our departure,” Mr. Buffett said.
The Omaha, Neb., conglomerate reported net earnings of $29.2 billion, or $17,909 per Class A share equivalent, up from a loss of $25.4 billion, or $15,467 a share, the year before.
Berkshire’s earnings a year ago were dragged down by an unexpected write-down at Kraft Heinz Co.
Berkshire posted operating earnings of $4.4 billion, down from $5.7 billion a year earlier, due to lower results in insurance underwriting and some of Berkshire’s smaller operating businesses.
Operating earnings exclude some investment results and Mr. Buffett has said they are more reflective of Berkshire’s performance than net earnings, which can fluctuate widely due to unrealized investment gains or losses.
In his annual letter, Mr. Buffett discussed corporate boards of directors, which he said are often ill-equipped to oversee companies and incentivized not to challenge executives.
He also said that at Berkshire’s annual meeting in May, shareholders will be able to ask questions of Berkshire executives Ajit Jainand and Greg Abel, the two leading candidates to succeed Mr. Buffett as CEO, in addition to questioning Messrs. Buffett and Munger.
Berkshire bought back about $5 billion of its own shares in 2019, the company said. The company changed its buyback policy last year, and some shareholders are frustrated the company hasn’t spent significantly more cash repurchasing its stock.
Berkshire’s biggest deal in 2019 was a $10 billion investment in Occidental Petroleum Corp. ’s bid to acquire Anadarko Petroleum Corp.
Some of Berkshire’s 60-odd subsidiaries completed acquisitions, but those deals tend to be small. Berkshire spent $1.7 billion on bolt-on acquisitions in 2019, the company said, up from $1 billion the prior year.
Berkshire also sold a workers’ compensation insurer called Applied Underwriters last year. Earlier this year, Berkshire said it would sell its newspaper business to Lee Enterprises Inc.
The conglomerate runs a large insurance operation as well as railroad, utilities, industrial manufacturers and retailers. Its holdings include recognizable names like Dairy Queen, Duracell, Fruit of the Loom, Geico and See’s Candies.
Berkshire’s insurance business sits at the core of its moneymaking machine. Insurance brings in billions of dollars of “float,” upfront premiums customers pay and that Berkshire invests for its own gain. Berkshire also holds large stock investments, including in Apple Inc.and Wells Fargo& Co.
Class A shares closed Friday at $343,499, up 1.1% for the year. In contrast, the S&P 500 is up 3.3% this year.
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