In his letter to the shareholders of Berkshire Hathaway, Warren Buffett listed the key contributors to Berkshire’s performance in 2024. This was largely due to the improvement in Treasury Bill yields, increase in earnings of insurance companies, higher share of equity investments, bargain buys in equity markets and investment in fundamentally good businesses. “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses,” Buffett wrote. Taking a dig at the Berkshire’s cash levels, Buffett wrote to shareholders that, “Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities.”
Higher Treasury Bill yields
The steady rates by Treasury bills helped add to the Berkshire’s bottomline. In a year that saw 53% of 189 businesses in Buffett’s empire reporting a decline in earnings, the operating earnings surged 71%. This was largely ‘aided by a predictable large gain in investment income as Treasury Bill yields improved and we substantially increased our holdings of these highly-liquid short-term securities,” wrote Warren Buffett.
According to Buffett, Berkshire’s investment and underwriting income showed significant improvement.
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Buffet reiterated that a significant amount of Berkshire’s investment is in equities. “Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities – mostly American equities although many of these will have international operations of significance.” Buffett also highlighted the investment in Japanese equities and the key 5 stocks where the company is planning to increase investment even above the 10% limit that was decided initially. The dividend investment from the Japanese companies also helped earnings performance.
Buffett pointed out that Berkshire owns a small percentage of a “dozen or so very large and highly profitable businesses with household names such as Apple, American Express, Coca-Cola and Moody’s. Many of these companies earn very high returns on the net tangible equity required for their operations.” At year-end, Berkshire’s holdings were valued at $272 billion. “Understandably, really outstanding businesses are very seldom offered in their entirety, but small fractions of these gems can be purchased Monday through Friday on Wall Street and, very occasionally, they sell at bargain prices. “We are impartial in our choice of equity vehicles, investing in either variety based upon where we can best deploy your (and my family’s) savings.
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