Page 22 - Investment Advisor April 2021

PORTFOLIO PERSPECTIVES

By Bernice Napach

Warren Buffett’s 9 Nuggets of Wisdom for

Investors: 2021

Berkshire Hathaway’s annual shareholder letter includes words of advice —

and some mea culpas.

erkshire Hathaway recently
reported $45.2 billion in earn-
B ings for 2020, down 48% from
the previous year as operating income
fell 9%, according to Warren Buffett’s
2021 letter to shareholders.
“Operating earnings are what count
most,” wrote Buffett, noting that the
firm not only failed to increase earnings
but also failed to make any sizable acqui-
sitions — both key goals of the firm.
The decline in operating earnings
resulted largely from an $11 billion write-
down due almost entirely to Berkshire’s
ownership of Precision Castparts (PCC),
bought in 2016.
“I paid too much for the company,”
wrote Buffett. “I was simply too opti-
mistic about PCC’s normalized profit
potential … laid bare by adverse devel-
opments throughout the aerospace
industry, PCC’s most important source
of customers.” Buffett called the error
“a big one.” Angeles, along with his partner Charlie
Munger and Vice Chairmen Ajit Jain
THE UP SIDE and Greg Abel — considered the two
Berkshire Hathaway did, howev- front-runners as his successor — at
er, increase the company’s per-share this year’s annual shareholder meeting
intrinsic value by retaining earnings and set for May 1. In addition, it will be a
repurchasing about 5% of its shares, virtual meeting live-streamed by Yahoo BNSF: dbvirago/stock.adobe.com; Power plant: AlexanderNovikov/stock.adobe.com
according to Buffett. Its stock finished with questions relayed by CNBC’s
2020 with a 2.4% gain, its weakest per- Becky Quick.
formance since 2015 when shares fell Nowhere in the letter did Buffett
12.5% and far below the 18.4% gain in mention the coronavirus pandemic,
the S&P 500. which has claimed over 500,000 lives “Bonds are not the place to be
Throughout this year’s annual share- in the United States and more than 2.5 1 these days,” wrote Buffett, refer- Treasury: Michael A. Scarcella/ALM Media)
holder letter, like the others that preced- million globally and which was a major encing the 0.93% yield in the 10-year
ed it, Buffett offered words of wisdom factor in global bond markets last year Treasury at year-end — it has since
for investors, and he disclosed what he and at times for stock markets as well. spiked to near 1.5% — and negative bond
termed a surprise. Here are nine takeaways from returns in Germany and Japan.
He will appear on stage in Los Buffett’s letter: “Fixed income investors world-

20 INVESTMENT ADVISOR APRIL 2021 | ThinkAdvisor.com