Warren Buffett chides ‘hand wringing’ bosses in shareholders letter
Berkshire Hathaway’s billionaire investment guru says he is looking for more American acquisitions and others should do the same
Billionaire investor Warren Buffett admonished “hand wringing” bosses on Friday for failing to have faith in the US economy.
In his annual letter to shareholders. Buffett, chairman of the Berkshire Hathaway investment fund, wrote there was “a lot of hand-wringing last year among CEOs who cried ‘uncertainty’ when faced with capital allocation decisions”.
This caution came even though many of their businesses enjoyed record levels of both earnings and cash last year, he added.
“At Berkshire, we didn’t share their fears, instead spending a record $9.8bn (£6.5bn) on plant and equipment in 2012, about 88% of it in the United States. That’s 19% more than we spent in 2011, our previous high.
“Charlie [Munger, his long-time business partner] and I love investing large sums in worthwhile projects, whatever the pundits are saying. We instead heed the words from Gary Allan’s new country song, Every Storm Runs Out of Rain.”
He added: “Opportunities abound in America. A thought for my fellow CEOs: Of course, the immediate future is uncertain; America has faced the unknown since 1776.”
Buffett wrote that he was disappointed with his investment firm’s performance over the year. For the ninth time in its 48 years, Berkshire’s percentage increase in book value – his benchmark for Berkshire’s investments – was less than the S&P 500 index’s percentage gain. But he said he and Munger expected to outperform the S&P over time. Berkshire Hathaway’s book value per share rose in 2012 by 14.4% while the S&P was up 16%.
“Our luck, however, changed early this year,” Buffett wrote of Berkshire’s joint buyout of Heinz, the ketchup and food group. Buffett invested a total of $12bn in the company but said Berkshire was still looking for large acquisitions. “Charlie and I have again donned our safari outfits and resumed our search for elephants,” he wrote.
Buffett defended his acquisition of 28 daily newspapers in the last 15 months for $344m. “Charlie and I love newspapers and, if their economics make sense, will buy them even when they fall far short of the size threshold we would require for the purchase of, say, a widget company.
“Charlie and I believe that papers delivering comprehensive and reliable information to tightly bound communities and having a sensible internet strategy will remain viable for a long time. We do not believe that success will come from cutting either the news content or frequency of publication. Indeed, skimpy news coverage will almost certainly lead to skimpy readership.”
There was no mention of retirement in the letter. The 82-year-old investor has said he intends to split his job in two when he eventually steps aside. Two former hedge fund managers, Todd Combs and Ted Weschler, have been appointed to help run Berkshire’s portfolio and are assumed to be his heirs apparent.