Warren Buffett Says Yet To Find Companies To Deploy Massive Cash Pile

Warren Buffett's annual letter to shareholders: Here are the key highlights.

<div class="paragraphs"><p>Warren Buffett (Photographer: Houston Cofield/Bloomberg)</p></div>
Warren Buffett (Photographer: Houston Cofield/Bloomberg)

Warren Buffett reiterated of his philosophy of investing in businesses that offer long-term growth rather than hunting for stocks, and he is still looking for companies to deploy more of Berkshire Hathaway Inc.'s cash pile.

"Charlie (Munger) and I are not stock-pickers; we are business pickers," Buffett, 91, said in his annual letter to shareholders, defending Berkshire Hathaway Inc.'s performance over the years.

He called the company a "trusted investor on American soil". The company contributes $3.3 billion out of the total corporate income-tax receipts of $402 billion of the U.S Treasury, averaging an approximate $9 million daily.

Buffett also rejected the perception that it's an assortment of financial assets. Berkshire owns and operates more U.S.-based infrastructure assets than any other American corporation, he said. The Berkshire’s balance sheet reported domestic infrastructure assets at $158 billion.

Ajit Jain's Contribution

Buffett, underscoring Berkshire's investment record, cited the example of a $8.6-million purchase of National Indemnity, the Omaha-based insurer in 1967. That has now catapulted to become part of the company's top investment and oldest-operating subsidy.

Berkshire’s total float (money earned in premiums before the claims payout) has grown from $19 million in 1967 to $147 billion. The float rose by $9 billion in the year gone by.

While there is uncertainty on long-term underwriting loss affecting the float, Buffett hopes to keep it at bay.

And credits this growth of the insurance unit to hiring Ajit Jain in 1986. Jain, hailing from Odisha and an alum of Indian Institute of Technology-Kharagpur, now serves as the vice-chairman of insurance operations at Berkshire Hathaway and is part of its board of directors.

Buffett recalled how he serendipitously hired Jain who had no prior insurance experience. "I said, 'Nobody’s perfect,' and hired him. That was my lucky day," Buffett said in the letter. "Ajit actually was as perfect a choice as could have been made. Better yet, he continues to be—35 years later."

The Berkshire Big Four

Berkshire's cluster of insurers remain at the top of the company's pile of investments, followed by 5.5% of Apple Inc. In the year gone by, Berkshire earned $785 million from Apple dividends and its share in Apple earnings stand at $5.6 billion.

The BNSF Railway is third with earnings of $6 billion in 2021. Berkshire Hathaway Energy, 91.1% owned by Berkshire, recorded a revenue of $4 billion in 2021. Bank of America, American Express Corp., Moody's Corp. and the Coca-Cola Co. figure among other top equity investments of Berkshire.

<div class="paragraphs"><p>Annual Letter by Warren Buffett</p></div>

Berkshire Hathaway's largest equity investment holdings

A Heavy Cash Purse

Berkshire’s balance sheet shows $144 billion of cash and cash equivalents, $120 billion of which is held in U.S. Treasury bills, all maturing in less than a year.

Buffett said he prefers keeping at least 80% of net worth in equities as he is yet to find entire companies or small portions thereof to meet the criteria for long-term holding. Therefore, the conglomerate has plugged in the money in Berkshire share repurchases.

In the past two years, the company repurchased 9% of the shares that were outstanding at yearend 2019 at a total cost of $51.7 billion. Since yearend as of Feb. 23, a repurchase of additional shares at a cost of $1.2 billion was also made.

Teaching And Advice To Students

Buffett concludes with how teaching and writing have remained long-standing ways of reflection and learning.

"Teaching, like writing, has helped me develop and clarify my own thoughts," he said. "Charlie calls this phenomenon the orangutan effect: If you sit down with an orangutan and carefully explain to it one of your cherished ideas, you may leave behind a puzzled primate, but will yourself exit thinking more clearly."

And Buffett had a message for university students. "I have urged that they seek employment in (1) the field and (2) with the kind of people they would select, if they had no need for money."