Things change -- boy do they ever -- but one thing doesn't and that's Warren Buffett's annual letter.
On Saturday morning the billionaire again professed his unwavering love for America, provided a voice of reason for the investing debates du jour, gave Berkshire Hathaway Inc.'s managers pats on the back, humbly admitted mistakes and assured shareholders that the conglomerate's -- and country's -- best days are still ahead.
Thankfully, the 86-year-old mostly spared us his bawdy analogies, slipping in a colonoscopy reference but leaving out an old metaphor on the productiveness of bisexuality.
Still, it did feel a tad flat this time, and not because it didn't have the usual dirty grandpa humor.
On the one hand, Buffett subtly sought to ease any anxiety investors might have over Donald Trump's presidency without even uttering Trump's name -- refreshing. In fact, had you lived under a rock for the last year and just read the letter, you wouldn't get the sense from it that something big happened on the political front, or even that it was a particularly contentious election year. "Babies born in America today are the luckiest crop in history" is a line Buffett copied and pasted from last year. (That said, his shout-out to the free-market system, immigrants and the rule of law was new.)
But why so dry? Berkshire's class A shares just reached a major milestone, closing above $250,000 apiece for eight consecutive days. He also didn't address Berkshire-backed Kraft Heinz Co.'s withdrawal of a $143 billion proposal to buy Unilever, a decision Buffett is said to have driven (this piece explains that whole situation). And no kind words for his dealmaking pal Jorge?
We were glad to see Buffett address the issue of transparency, though. I've written that it's the biggest change his eventual successor will have to make at Berkshire. For example, the sprawling manufacturing, retailing and services division comprises everything from Fruit of the Loom underwear to Lubrizol chemicals, but the individual performances of many of these businesses is little known to investors. In Buffett's discussion of this unit, he pointed to where they can find "a good bit of detail" about the operations, adding:
"Be aware, though, that it's the growth of the Berkshire forest that counts. It would be foolish to focus over-intently on any single tree."
Forest, not trees, got it. But this is a step in the right direction, laying the groundwork for the next in command to improve on Berkshire's transparency.
Notably absent from the letter: the "elephant gun" and M&A outlook. It's probably what many readers look forward to most so they can play the "what will Warren buy next" game. Buffett has gradually cut back the discussion of his acquisition plans in recent letters, maybe because they're well known at this point, but certainly not because they've changed. The $37 billion purchase a year ago of Precision Castparts, the aerospace-parts supplier, is already paying off. If history's any guide, another transaction of that magnitude should be coming.
Oddly, Buffett went a little long-winded in a section shooting down criticism that share buybacks are almost "un-American." It'd be one thing if Buffett were making the case because he was preparing to repurchase Berkshire stock, but his policy on doing so is clear: only when the stock is trading at a mere 20 percent premium to the company's book value -- which it's nowhere near presently. It could just be that he was voicing support for companies Berkshire has stakes in that could continue borrowing money for repurchases if they think their stocks are cheap.
Berkshire's Price-to-Book Ratio 1.48
Buffett also corrected the fallacy that Berkshire will own certain stocks forever. This comes as Berkshire recently sold its entire remaining stake in Wal-Mart Stores Inc., while backpedaling on his anti-airline stance by accumulating big positions in carriers such as Delta Air Lines Inc. and American Airlines Group Inc.
Could he be hinting that another exit is approaching? If so, our guess would be American Express Co. Berkshire's nearly 17 percent stake in the credit-card company is worth about $12 billion today, compared with the $1.29 billion Berkshire paid for it. And Charlie Munger, the 93-year-old vice chairman of Berkshire, pretty much ripped AmEx earlier this month, saying that the future of the payments industry isn't "knowable" and that if you're confused about its prospects, "welcome to the club." These are not things you'd expect to hear from the top shareholder of AmEx, and Munger is Buffett's influential right-hand man.
Buffett also made no note of Wells Fargo & Co., another big investment, which has been mired in a scandal involving the creation of unauthorized accounts for customers to try to meet sales targets. Chairman and CEO John Stumpf left following a verbal lashing from Senator Elizabeth Warren and was replaced by Tim Sloan, whom Buffett said in November was the "exactly right" choice. The latest filing showed no change in Berkshire's stake in the bank.
So another year, another letter. It's always good to hear from the Oracle, but somehow this time he left us wanting more.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.
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