Elon Musk asked Cathie Wood about the Buffett indicator flashing red. The Ark Invest chief explained why she isn’t worried.

Elon Musk SpaceX Tesla CEO holds hand to face thinking
Elon Musk.

  • Elon Musk asked Cathie Wood about the Buffett indicator’s record readings.
  • The Ark Invest CEO criticized GDP as a measure and trumpeted innovation.
  • Buffett’s favorite market gauge surged before the dot-com crash.
  • See more stories on Insider’s business page.

Elon Musk asked Cathie Wood this week what she thought about Warren Buffett’s favorite market indicator flashing red recently. The star stock-picker replied that the gauge is likely inaccurate, and argued the heady valuations of certain technology stocks are justified.

“What do you think of the unusually high ratio of S&P market cap to GDP?” the Tesla chief asked the Ark Invest boss. He was referring to a version of the Buffett indicator, which takes the combined market capitalization of a country’s publicly traded stocks and divides it by the latest quarterly GDP figure available.

The S&P 500 represents about 78% of the total market cap of US stocks, as measured by the Wilshire 5000 Total Market Index. The S&P 500’s combined market cap has surged past $33 trillion this year – more than 150% of the latest estimate for fourth-quarter US GDP of $21.5 trillion.

Wood replied to Musk’s question by suggesting that GDP understates economic growth because it doesn’t fully account for increased productivity. Technological innovations today are “dwarfing” those in previous eras, driving down prices and fueling demand, she continued.

The Ark founder also drew a line between the dot-com bubble and the current hype around tech stocks.

“Back then, investors chased the dream before the tech was ready and while costs were too high,” she said. “After gestating for 20-30 years, the dream has turned into reality.”

Moreover, Wood predicted that companies that have failed to innovate and instead have borrowed money to fund stock buybacks and dividends “will pay a steep price.” She expects them to be forced to cut prices to shift inventory and make debt repayments.

In short, Wood’s view is that the disconnect between the S&P 500’s market capitalization and national GDP isn’t worrying because GDP is a flawed measure, unprecedented innovation justifies higher company valuations, and technological advances are cutting costs so inflation won’t be a problem either.

Her stance clashes with Buffett’s praise of his namesake gauge as “probably the best single measure of where valuations stand at any given moment” in a Fortune article in 2001. When the indicator peaked during the dot-com boom, it should have been a “very strong warning signal” of an upcoming crash, the Berkshire Hathaway CEO wrote.

Musk might have to wait a few more months to find out which investor is right.

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Elon Musk slammed Warren Buffett’s Texas power plan as ‘crazy’ – and called for the state to rely on Tesla instead

Warren Buffett and Elon Musk
Warren Buffett and Elon Musk.

  • Elon Musk slated Warren Buffett’s Texas power plan as “crazy.”
  • He called for the state to use Tesla Megapacks to store emergency power instead.
  • Musk and Buffett have clashed before on subjects such as moats and tweets.
  • See more stories on Insider’s business page.

Elon Musk dismissed Warren Buffett’s plan to prevent another Texas power crisis in a recent tweet. The Tesla CEO also proposed the state rely on his company’s solution instead.

“This is crazy,” Musk said. “Should use Tesla Megapacks for load-leveling the grid. More effective, more reliable and costs less.”

Buffett’s Berkshire Hathaway conglomerate wants to establish a Texas Emergency Power Reserve and build 10 natural-gas power plants across the state by November 2023, the Dallas Morning News reported.

It has offered to invest $8.3 billion in emergency power generation that would be backed by a $4 billion guarantee. However, it expects to be repaid and earn an annual return of 9.3% on its investment, funded via higher energy bills for Texans.

Berkshire’s bosses have argued that their backup system would be cheaper than “weatherizing” the electric grid to cope with the cold, or revamping the state’s energy market to reward excess capacity.

Musk would prefer if Texas used Tesla Megapacks – the clean-energy company’s battery-storage systems – to avoid another devastating blackout. The systems, which look like rows of high-school lockers, are pitched as powerful, compact, and easy-to-install on Tesla’s website.

Notably, Buffett’s beloved Apple plans to use 85 of the battery packs on a Northern California solar farm to help power its Cupertino headquarters, The Verge reported this week.

Musk and Buffett have butted heads before. The Tesla chief may have quoted Buffett in the past, but he’s admitted he’s not the investor’s “biggest fan.” He’s also described allocating capital across Berkshire as “kind of a boring job,” and cast doubt on Buffett’s “kindly grandfather” persona.

Moreover, the serial entrepreneur has labeled Buffett’s idea of economic moats, or enduring competitive advantages such as a beloved brand or patented technology, as “lame.”

“Elon may turn things upside down in some areas,” Buffett responded. “I don’t think he’d want to take us on in candy,” he added, referring to Berkshire-owned See’s Candies.

Buffett has also praised Musk as a “remarkable guy,” but suggested he has “room for improvement” and should be more restrained in his tweeting.

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Warren Buffett’s favorite market gauge surges to record high, signaling global stocks are overpriced and poised to tumble

Warren Buffett
Warren Buffett.

  • Warren Buffett’s favorite metric suggests global stocks are pricier than ever.
  • The “Buffett indicator” reached 123%, exceeding its level during the dot-com boom.
  • Economic shutdowns and government stimulus have fueled the record readings.
  • See more stories on Insider’s business page.

Warren Buffett’s preferred market gauge has surged to an all-time high, signaling global stocks are extremely overpriced and could crash in the coming months.

The global version of the “Buffett indicator” has breached 123%, surpassing its previous record of 121% during the dot-com bubble. The milestone was first highlighted by the Welt market analyst Holger Zschaepitz on Twitter.

The metric takes the combined market capitalizations of publicly traded stocks worldwide, and divides it by global gross domestic product. A reading of 100% or more suggests the global stock market is overvalued relative to the world economy.

Buffett, the billionaire investor who runs Berkshire Hathaway, trumpeted the indicator in a Fortune magazine article in 2001. He described it as “probably the best single measure of where valuations stand at any given moment.”

When the yardstick hit a record high before the dot-com bubble burst, that should have been a “very strong warning signal,” Buffett added.

However, Buffett’s favorite indicator has several shortcomings. For example, it compares current stock valuations to past GDP figures. Not all countries provide regular, reliable GDP data either.

The gauge’s elevated level also reflects the fact that pandemic-linked lockdowns, business closures, and travel restrictions have depressed economic growth. Meanwhile, government interventions have artificially pumped up stock prices.

For example, the Buffett indicator continues to flirt with record highs in the US, partly because federal officials have pumped trillions of dollars into the economy over the past year.

Here’s the global version of the Buffett indicator:

Buffettindicatorglobal_0321
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Warren Buffett’s annual salary has been $100,000 for 40 years. Here’s a look at the billionaire investor’s unique compensation.

warren buffett
Warren Buffett.

  • Warren Buffett’s annual salary has been $100,000 for the past 40 years.
  • Berkshire Hathaway spends triple that amount on his security each year.
  • Buffett owns about $100 billion of Berkshire stock and lives modestly.
  • See more stories on Insider’s business page.

Warren Buffett is a legendary investor, leads one of the world’s biggest companies, and has ranked among the world’s wealthiest people for decades. Yet he earns a modest annual salary of $100,000 – and hasn’t had a pay rise in 40 years, SEC filings show.

As Berkshire Hathaway’s CEO and chairman, Buffett recommends to his board of directors how much he should be paid, and decides the the rest of the executives’ compensation. The 90-year-old has received $100,000 a year since 1980 – a fraction of the $15 million average pay of S&P 500 CEOs in 2019.

Buffett doesn’t earn much from other sources either. He netted double his salary in annual directors’ fees in the 1990s and early 2000s, before he resigned as a director of The Washington Post Company and stepped down from other corporate boards.

The highest total compensation he’s ever received at Berkshire was $525,000 in 2010, comprising his $100,000 salary, $75,000 in directors’ fees, and $350,000 allocated to his security costs.

Berkshire spends far more on Buffett’s personal and home security than it pays him directly. Keeping the boss safe has cost the company an average of $339,000 a year since 2008, or $4.4 million in total.

Buffett isn’t in desperate need of a big salary. He owns roughly $100 billion of Berkshire stock – which he’s gradually giving away – and doesn’t spend much: he lives in a modest family home, drives a basic car, and eats breakfast at McDonald’s.

The investor also doesn’t use a company car, belong to any clubs where Berkshire pays his dues, or commandeer company-owned aircraft for his personal use.

Buffett shared his views on salaries at Berkshire’s annual shareholder meeting in 2017, when he was asked how much his successor would be paid. He expressed hope that the next CEO would already be rich, and wouldn’t be motivated to earn 10 or 100 times the money their family needs to live on.

“They might even wish to, perhaps, set an example by engaging for something far lower than, actually, what you can say their true market value is,” he continued, adding it would be “terrific” if that was the case.

Buffett is a firm believer that CEOs should be incentivized to deliver long-term success for their companies. He believes massive annual salaries, bonuses, and short-term stock options encourage short-term thinking.

Charlie Munger – Buffett’s right-hand-man and Berkshire’s vice-chairman – has followed Buffett’s example. He’s also received a salary of $100,000 a year for several decades now, SEC filings show.

In contrast, Ajit Jain and Greg Abel, who head up Berkshire’s insurance and non-insurance divisions respectively, are paid far more handsomely. Both men have earned a $16 million salary in each of the past of three years, plus total bonuses of $7 million each.

Finally, Berkshire’s finance chief, Marc Hamburg, has seen his salary grow from about $300,000 in 1996 to $3.3 million last year.

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Warren Buffett’s Berkshire Hathaway scores $17 billion gain across 5 stocks as value stages a comeback

warren buffett
Warren Buffett.

  • Warren Buffett has racked up $17 billion in gains across just five stocks this year.
  • Berkshire Hathaway’s Bank of America stake has soared in value by $9 billion.
  • Buffett is up more than $1 billion on Kraft Heinz, GM, and US Bancorp in 2021.
  • See more stories on Insider’s business page.

Warren Buffett is winning big from the flight to value stocks ahead of the global economy reopening this summer. The famed investor’s Berkshire Hathaway conglomerate has notched an astounding $17 billion in gains across only five stocks this year.

Buffett’s company is up $9 billion on Bank of America alone. The banking group’s stock price has surged 30% since the start of January, boosting the value of Berkshire’s enlarged stake from $30 billion to $39 billion.

Moreover, Berkshire has scored a $3.7 billion gain on American Express, as the financial-services group’s stock has jumped 30% this year. It has also made $1.5 billion on Kraft Heinz, $1.4 billion on General Motors, and $1.3 billion on US Bancorp in under three months.

Buffett’s bets on five Japanese trading houses last fall are delivering too. Itochu, Mitsui, Marubeni, Mitsubishi, and Sumitomo shares have gained an average of 26% this year, lifting the combined value of Berkshire’s holdings by $1.6 billion.

Other Berkshire investments are outperforming as well. Chevron, Suncor Energy, and Synchrony Financial have all climbed more than 20% this year, while Wells Fargo – previously one of Berkshire’s biggest holdings – has rallied 37%. Meanwhile, the benchmark S&P 500 index is up 5.8% this year.

However, Berkshire’s gains have been partly offset by the recent exodus from tech stocks. Apple – which makes up more than 40% of Buffett’s US stock portfolio – has slumped 7% this year. The decline has wiped close to $8 billion off the value of Berkshire’s stake.

Berkshire has also taken a hit from Coca-Cola, leaving its shares worth about $900 million less today than at the start of January. The company’s also down about $400 million on both Snowflake and Verizon.

Buffett’s signature approach of sniffing out high-quality, undervalued businesses and investing for the long term is finally paying off. Yet if growth stocks do take off again, his Apple wager will likely flourish. It appears Buffett’s found a way to have his cake and eat it too.

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Warren Buffett is offering up to $1 million a year for life to the winner of his March Madness bracket challenge

Warren Buffett
Warren Buffett.

  • Warren Buffett’s Berkshire Hathaway is resuming its March Madness bracket contest.
  • One employee will win at least $100,000 and as much as $1 million a year for life.
  • If Buffett’s favorite team makes the final four, the winner’s prize money doubles.
  • See more stories on Insider’s business page.

Warren Buffett’s Berkshire Hathaway is offering one employee up to $2 million a year for the rest of their lives. They just have to guess the winner of 48 games in a basketball tournament, and Buffett’s favorite team has to make it to the final four.

The billionaire investor’s company said this week that it would reinstate its March Madness bracket contest, after the NCAA Men’s Division I Basketball Tournament was cancelled last year because of the pandemic.

Berkshire will award $100,000 to the employee who picks the winner of the most games before making an incorrect guess. It will hand $1 million to any employee who guesses the victor of all 32 first-round games correctly.

If a Berkshire employee manages to guess the outcome of all 48 first-round and second-round games, they will receive an annuity paying $1 million a year for the rest of their lives.

Moreover, if Creighton University – Buffett’s hometown team – advances to the final four, Berkshire will double the prize money. That would increase the top award from $1 million a year to $2 million.

“Warren Buffett hopes that this year’s winner will be awarded one of the larger prizes and receives the Creighton ‘bump,'” Berkshire said in a press release.

Buffett started the yearly contest in 2016, and since then a number of Berkshire employees have correctly picked 31 of the 32 winners of the first-round games, the company said.

The billionaire touted the competition as the “ultimate office bracket contest” in a CNBC interview in 2016. “We have a good time,” he said a year later.

Buffett may have got the idea from his friend Dan Gilbert, the founder and chairman of Quicken Loans, which now trades as Rocket Companies. The investor agreed to finance the mortgage group’s bracket challenge in 2014, which offered $1 billion to anyone who filled out a perfect March Madness bracket.

Nobody won, but Berkshire was paid a $10 million premium for shouldering the risk.

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‘Big Short’ investor Michael Burry called Apple a ‘Buffett stock’ in 1999. Warren Buffett finally bought it in 2016.

Michael Burry Warren Buffett

  • Warren Buffett counts Apple as one of his best investments ever.
  • “The Big Short” investor Michael Burry identified Apple as a “Buffett stock” in 1999.
  • Buffett’s Berkshire Hathaway only bought a stake in the iPhone maker in 2016.
  • See more stories on Insider’s business page.

Warren Buffett praised Apple, one of his most lucrative bets ever and easily the biggest holding in Berkshire Hathaway‘s stock portfolio, as a “jewel” in his latest annual letter. Yet the investor only realized the iPhone maker’s worth and bought a stake in 2016 – nearly two decades after Michael Burry described it as a “Buffett stock.”

Buffett famously seeks to invest in undervalued companies with strong consumer brands, robust finances, and high-quality management. Burry, whose billion-dollar bet against the US housing bubble was chronicled in the book and movie “The Big Short,” recognized that Apple boasted all of those attributes in the late 1990s.

Apple ticked the boxes

Burry, who now runs Scion Asset Management, studied Buffett closely as a young investor and incorporated the Berkshire chief’s teachings into his own research. He shared his stock picks and debated their merits on the Silicon Investor forum, where he posted more than 3,000 times during the dot-com era.

One of Burry’s favorite stocks was Apple, as it showed many of the characteristics that Buffett looks for in a business.

“Apple, boy, everyone is living in the past on this one,” he posted in April 1999, when Apple’s market capitalization was under $6 billion, compared to over $2 trillion today. “Management is now great. The product is now very good, but even more importantly the marketing is now great.”

“No one is crediting Apple, but to me, it has the markings of a value stock and potential Buffett-like stock,” he said in another post that month.

“A real cash machine of late, trading at a mid-single digit multiple of cash flow, with a great recovery in terms of operating efficiency,” he continued. “A great brand name with proprietary advantages and mindshare. Subtract out the cash and it was recently trading at about 10 times earnings.”

The investor doubled down on his position in a May 1999 post. “Apple’s now a Buffett stock thanks as much to its management as its brand,” he said. Apple co-founder Steve Jobs had returned as CEO in 1997, hired future CEO Tim Cook in 1998, and launched the beloved iMac that year as well.

Burry trumpeted the company as “incredibly undervalued” given its cash generation, market opportunity, solid balance sheet, and limited downside in another post in May 1999.

Moreover, he pointed to Apple’s pricing power and consumer brand as evidence it was a Buffett-worthy stock in a July 1999 post.

“Buffett’s point has always been that in the long run it is the consumer franchises that last,” Burry said.

Burry spotted Apple before Buffett

Buffett loves consumer brands, as they allow their owners to hike prices and serve as “moats” that keep competitors at bay. Some of the Berkshire Hathaway chief’s biggest investments are household names such as American Express, Coca-Cola, and Kraft Heinz.

The investor has described Apple as a consumer-product company that uses technology, instead of a technology company, to explain why he invested despite his historical aversion to tech stocks. He lauded it as “probably the best business” he knows in the same interview.

While Burry beat Buffett to Apple by more than 15 years, he didn’t fully capitalize on his early insight. The budding investor sold his shares after they jumped between 50% and 75% in a matter of months, he disclosed in a July 1999 post.

Burry reinvested at some point over the next 15 years. His Scion fund’s biggest position in the first quarter of 2016 was Apple – it owned 75,000 shares worth $8 million, SEC filings show.

Yet Burry sold the following quarter. If he had held on, Scion’s stake would have more than quadrupled in value to $36 million today.

Regardless, Burry deserves kudos for unearthing a gem. If Buffett bought Apple back when Burry realized it was his kind of company, the Berkshire chief would have made far more than his current $80 billion gain on the investment.

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Justin Sun postponed a $4.6 million lunch with Warren Buffett, plowed $10 million into GameStop stock, and lost out on a $69 million NFT. Here’s a look at the crypto whiz kid.

Justin Sun Warren Buffett
  • Crypto whiz kid Justin Sun postponed a $4.6 million charity lunch with Warren Buffett.
  • The Tron boss invested $10 million in GameStop and lost out on a $69 million NFT.
  • Here are eight things to know about the 30-year-old tech entrepreneur.
  • See more stories on Insider’s business page.

Crypto whiz kid Justin Sun has shot to fame in recent years for postponing a $4.6 million charity lunch with Warren Buffett, investing $10 million in GameStop during the buying frenzy, and losing out on a $69 million NFT during a Christie’s auction.

Sun is the boss of Tron and BitTorrent, the 28th and 63rd biggest cryptocurrencies with a combined market capitalization of more than $5 billion.

Here are eight things to know about the 30-year-old tech entrepreneur:

A protégé of Alibaba founder Jack Ma

JustinSun5
Alibaba founder Jack Ma

Justin Sun is a protégé of Alibaba founder and executive chairman Jack Ma. Sun’s oldest photo on Instagram shows him receiving a certificate from Ma. “Inspired by the best to shape the future for the better,” the caption reads.

Sun was the youngest member of the inaugural class at Hupan University, a Chinese business school founded by Ma in 2015, according to the South China Morning Post. Ma recruited 30 students who he believed could revolutionize the Chinese business world. Sun wrote his thesis on the blockchain industry, titling it “The Birth of a Decentralized Internet,” SCMP said. He graduated from Hupan in 2018.

An Ivy League graduate

university of pennsylvania

Sun graduated from Peking University with a bachelor’s degree in history in 2011, according to his LinkedIn page. Peking is China’s second-best university, according to Times Higher Education’s World University Rankings. Two years later, Sun earned a master’s degree in political economy from the University of Pennsylvania, one of eight prestigious US colleges that make up the Ivy League.

 

An entrepreneur and dealmaker

BitTorrent Data Belongs To You Billboard

Sun joined Ripple Labs as a chief representative and adviser in Greater China at the end of 2013, according to his LinkedIn page. He worked at the cryptocurrency startup — which has received backing from Google Ventures, Andreessen Horowitz, and other blue-chip investors — for just over two years. Sun also founded Callme or Peiwo, China’s largest voice live-streaming app, in 2013.

In July 2017, Sun founded the Tron Foundation, a blockchain company with its own cryptocurrency that is “dedicated to building the infrastructure for a truly decentralized Internet,” his LinkedIn page states. Less than a year later, Tron acquired BitTorrent, a peer-to-peer file-sharing service, for around $126 million, according to TechCrunch. Sun currently serves as CEO of Peiwo, Tron, and BitTorrent, now known as Rainberry.

 

A millennial influencer

twitter on phone

Sun has a powerful presence on social media with more than 2.2 million Twitter followers. He’s also posted pictures of himself posing with celebrities such as Los Angeles Lakers legend Kobe Bryant.

Forbes included Sun in its 30 under 30 Asia list in 2017, and in its 30 under 30 China list from 2015 to 2017, Sun wrote on his LinkedIn page. 

A crypto advocate

FILE PHOTO: Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 14, 2018. REUTERS/Dado Ruvic/Illustration
FILE PHOTO: Representations of the Ripple, Bitcoin, Ethereum and Litecoin virtual currencies are seen on motherboard in this illustration picture

Sun planned to use his meal with Buffett to convert the notorious skeptic of bitcoin and other cryptocurrencies into a true believer. Buffett has said Bitcoin has “no unique value” and will ultimately become worthless, and derided it as a “delusion” and “rat poison squared.” 

Sun executed a full-court press on Buffett during their dinner in January 2020. He invited eToro founder and CEO Yoni Assia, Litecoin creator Charlie Lee, and other crypto advocates to dine with them. He also gave Buffett a smartphone loaded with bitcoin and Tron, although Buffett later said he doesn’t own any cryptocurrencies.

A controversial figure

China Flag

After Sun announced he was rescheduling his lunch with Buffett, Chinese news outlet Caixin reported he was being held in China over accusations of illegal fundraising, gambling, money laundering, and pornography activities, citing a report by the 21st Century Business Herald.

Sun dismissed the allegations on Weibo and said he was being treated for kidney stones. “The illegal network fundraising was not true,” he wrote in Mandarin, adding that Tron “actively cooperated” with authorities to comply with regulatory requirements. He added that Tron complied with laws and regulations in Singapore, where it’s located, and the money-laundering allegation was “not true.”

A meme-stock fan

gamestop line

Sun invested $10 million in GameStop and $1 million in each of AMC and the iShares Silver Trust during the meme-stock frenzy in January 2021. He told Bloomberg that the Wall Street Bets movement represented a “paradigm shift” in finance, and suggested memes are the new fundamentals for the next generation of investors.

 

A NFT proponent

5,000 everydays artwork by Beeple, which was sold at Christies auction house for $69 million
“Everydays: The First 5000 Days” by Beeple, a digital artwork sold at Christie’s auction house for $69 million.

Sun was the runner up in the record-breaking Christie’s auction of a $69 million non-fungible token (NFT) in March 2021. He tried to bid $70 million for the digital artwork after he was outbid with 20 seconds to go, but his offer wasn’t received by Christie’s systems.

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Warren Buffett’s Berkshire Hathaway scores $1.2 billion gain on Chevron in under 10 weeks

warren buffett
Warren Buffett.

  • Warren Buffett has scored a $1.2 billion gain on Chevron this year.
  • Berkshire Hathaway built a 2.5% stake in the oil major in the second half of 2020.
  • The investment has surged in value by nearly 30% to $5.3 billion.
  • Visit the Business section of Insider for more stories.

Warren Buffett’s Berkshire Hathaway has racked up a $1.2 billion gain on its Chevron investment in under 10 weeks.

The famed investor’s company owned a 2.5% stake in the oil-and-gas group worth $4.1 billion at the end of December, it revealed in a regulatory filing last month. Chevron’s stock price has surged 29% since then as crude prices have rebounded, boosting the value of Berkshire’s stake to $5.3 billion.

Berkshire began buying Chevron shares in the third quarter of 2020. It secured regulatory permission to not include the stock in its 13-F portfolio update for that period, as it was still building the position.

The company purchased 44.3 million Chevron shares in the third quarter, and another 4.2 million shares last quarter, it disclosed in filings last month. The energy stock ranked among its 10 biggest holdings by market value at the end of 2020, Buffett said in his latest letter to shareholders.

Buffett’s decision to back Chevron is paying off so far, but it remains somewhat surprising. After all, Buffett expressed doubts about the oil sector’s prospects at Berkshire’s annual meeting last year, following his painful bet on Occidental Petroleum.

“If you’re an Oxy shareholder, or any shareholder in any oil-producing company, you’ll join me in having made a mistake so far in terms of where oil prices went,” he said. “Who knows where they go in the future?”

Buffett also stepped in to help Occidental beat out Chevron in a bidding war for Anadarko Petroleum in 2019. His subsequent bet on Chevron suggests there’s no bad blood left over from the clash.

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Warren Buffett’s Berkshire Hathaway posts lower profits, reveals $25 billion in stock buybacks last year

warren buffett
Warren Buffett.

  • Warren Buffett’s Berkshire Hathaway posted a 9% drop in operating earnings in 2020.
  • The billionaire investor’s company took a $10 billion writedown on Precision Castparts.
  • Berkshire repurchased about $25 billion of its stock last year.
  • Visit the Business section of Insider for more stories.

Warren Buffett’s Berkshire Hathaway suffered a 9% decline in operating earnings last year as the COVID-19 pandemic caused widescale disruption to its business, its fourth-quarter earnings revealed on Saturday.

The famed investor’s conglomerate owns scores of businesses including Geico, See’s Candies, and the Burlington Northern railroad. It also holds multibillion-dollar stakes in public companies such as Apple, Bank of America, and Coca-Cola.

Berkshire’s revenues only slid 4% last year, but its investment gains slumped by more than 40%, slashing its net earnings to about $43 billion.

The company generated slimmer profits from its insurance division’s investments, its railroads, and its manufacturing, service, and retail businesses. However, it earned more income from utilities and energy, as well as insurance underwriting.

Berkshire boasted $138 billion in cash and short-term investments at the end of December, underscoring its failure to make the “elephant-sized” acquisition that Buffett has been hunting for several years now.

Precision Castparts – Berkshire’s last big acquisition, bought for $37 billion in 2016 – posted a 29% slump in revenue and a 65% plunge in pre-tax earnings in 2020.

Buffett wrote down the value of the manufacturing subsidiary by $10 billion, citing question marks around the timing and scale of the recovery in the commercial-airline and aerospace industries as vaccines are rolled out globally.

The investor admitted Berkshire paid too much for the business in his annual letter on Saturday, calling the deal terms a “big” error on his part.

Buffett’s company spent about $7.8 billion on stocks last quarter, which included Chevron, Verizon, and Marsh & McLennan. It sold a little over $10 billion worth of stock, as it cashed out some of its massive Apple stake and slashed its positions in JPMorgan and Wells Fargo.

Berkshire’s investment moves last quarter mean it spent about $30 billion in total on stocks last year. However, it sold about $39 billion worth, making it a net seller to the tune of roughly $9 billion in 2020.

Buffett’s company repurchased the equivalent of 81,000 of its “A” shares – or nearly 5% of its total shares outstanding – for $24.7 billion in 2020. That included $8.8 billion in buybacks last quarter alone, just shy of the record $9 billion worth in the third quarter.

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