The important omissions in Buffett’s annual letter to Berkshire investors
Lots of people have been giving you their views about what Warren Buffett had to say in his recent annual letter to Berkshire Hathaway shareholders.
What I’m going to do, however, is something different — talk with you about what Buffett didn’t say. Think of it as a modern-day version of “Silver Blaze,” the famous Sherlock Holmes story involving the dog that didn’t bark.
In his letter, containing his usual deft combination of one-liners (“what is smart at one price is stupid at another”), selfdeprecation (“my error caused Berkshire shareholders to give far more than they received”) and attacks on Wall Street greedmeisters, there was one thing conspicuously missing. To wit: any serious discussion of Berkshire’s two largest stock investments — the Kraft Heinz food conglomerate and the Wells Fargo banking giant, whose combined $60 billion value at year-end matters even to a company like Berkshire, whose stock is worth more than $400 billion.
In his 2015 letter, Buffett lavished praise on 3G Capital, the Brazilian private-equity crew that controls Kraft Heinz and that Berkshire has backed with tens of billions of dollars of capital in various deals. 3G’s specialty is firing thousands of people at the companies it buys, which Buffett thought was just fine.
“Their method, at which they have been extraordinarily successful,” he wrote, “is to buy companies that offer an opportunity for eliminating many unnecessary costs and then — very promptly — to make the moves that will get the job done.”
He also had nice things to say about the management of Wells Fargo and managers of three other companies in which Berkshire holds major stakes: Coca-Cola, American Express and IBM. “These four investees possess excellent businesses and are run by managers who are both talented and shareholder-oriented,” he wrote.
This year, the only discussion of Kraft Heinz involved accounting quirks. There was no discussion whatever of Wells Fargo. Given that Berkshire’s 27 percent Kraft Heinz stake was worth $28.4 billion and its 10 percent Wells stake was worth $27.6 billion — and Buffett isn’t subject to space limitations in his shareholder letter — I found that silence striking.
I sent an email to Buffett asking for an explanation. I didn’t hear back. Buffett, with whom I was friendly for decades, has declined to speak to me since I criticized his role facilitating the 3G corporate desertion transaction in which Florida-based Burger King bought Tim Hortons of Oakville, Ontario, and became Canadian.
But I think it’s quite clear why Buffett didn’t discuss Kraft Heinz or Wells. It’s climate change. The social climate, that is.
Now that we’ve got a president elected with huge support from aggrieved working-class voters — the kind of people whose jobs vanish when 3G appears — it would be needlessly provocative for Saint Warren to publicly support firing people.
And as for Wells Fargo — these days, given its numerous missteps, it feels like “ScandalRidden” should be added to its name.
Look, in many ways, I’m a Buffett fan. I own a substantial (by my standards) chunk of Berkshire stock, and I have enormous respect for his decision to give virtually all of his wealth to charity and for his campaign to get fellow billionaires to agree to donate at least half their wealth. I’ve seen him be incredibly gracious to people, including one of my children to whom I introduced him.
But when it comes to business, as I’ve said before, Buffett is no saint. Get between him and something he wants, and you’ll find a hole in yourself the size of Warren Edward Buffett.
In 2015, I was struck by the way that Kraft Heinz, which he helped create and on whose board he sits, announced it was firing 2,600 workers the day before Berkshire reported record quarterly profits because it was required to write up the value of its Kraft Heinz stake by $4.4 billion.
This year, I’m struck by the contrast between his lavish 2015 praise of the managements of 3G and Wells Fargo and his 2016 silence. What he’s not saying now is even more interesting than what he did say the year before. The Silver Blaze syndrome strikes again.
In his annual letter to Berkshire Hathaway shareholders, Warren Buffett skirts the company’s major holdings in Kraft Heinz and Wells Fargo.
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