Berkshire’s tech, airline bets add to intrigue on Buffett Letter
FEW THINGS have mattered more to markets this year than the daily headlines (and tweets) streaming out of Washington.
Last Saturday, though, lots of investors are likely to shift their attention to the US heartland, when billionaire Warren Buffett releases his annual letter to Berkshire Hathaway Inc. shareholders.
Here are some of the topics the 86-year-old Sage of Omaha may discuss:
• Airlines, Apple: Investors will be eager to learn more about some big and surprising additions to Berkshire’s stock portfolio last year.
As of Dec 31, 2016 the company held US$6.6 billion of shares in Apple Inc. and US$9.3 billion in the four largest US airlines: American Airlines Group Inc., Delta Air Lines Inc., Southwest Airlines Co. and United Continental Holdings Inc. The bets seem to go against some of Buffett’s long-held ideas. He’s generally avoided investing in technology companies, because he finds it harder to predict whether they’ll be around for the long haul. He’s also spent years criticising airlines as terrible businesses.
Berkshire investment manager Ted Weschler could have helped spur the shift in thinking.
He explained to a German magazine last year how cloud computing and apps had made customers more loyal to the iPhone maker. People familiar with the matter have said that Weschler studied up on the airline industry last year after seeing a presentation from American Chief Executive Officer Doug Parker.
Wall Street analysts have speculated that Berkshire could eventually buy one of the airlines. Buffett previously acquired railroad BNSF after taking a minority stake in the company and two of its competitors.
• Trump? Buffett was an outspoken supporter of Hillary Clinton in last year’s election, so Donald Trump’s victory in November will be a delicate subject. Since then, the Berkshire chairman has called for unity and said he “overwhelmingly” supported the president’s choices as he picked a cabinet. Buffett also reiterated that the US economy will do fine over the long run, regardless of who’s in the Oval Office.
That tone is almost certain to carry over to Saturday’s letter.
While Buffett may not mention Trump by name, it’s possible he could comment on some of the business before the new administration and the Republican-led Congress, like an overhaul of the corporate tax code.
The letter could also strike a different note than Trump on immigration.
• Earnings power: Beyond stock bets and politics, Buffett always uses his letter to update shareholders on the sprawling, US$418 billion (RM1.9 trillion) conglomerate he’s run for more than five decades. While Berkshire’s share price surged 23 per cent last year, earnings through the first nine months showed more muted gains.