Warren Buffett honors Charlie Munger in annual note, Berkshire reports record cash pile

Investors have long sought wisdom from the Oracle of Omaha on markets, the economy and life in general. But Buffet opened Berkshire’s 2023 annual report on a personal note with a dedication to Munger, who died in November at age 99, just 33 days before the milestone birthday.

Buffett said that Munger was the “architect” behind the conglomerate. “In the physical world, great buildings are linked to their architect while those who had poured the concrete or installed the windows are soon forgotten,” he wrote. “Berkshire has become a great company. Though I have long been in charge of the construction crew; Charlie should forever be credited with being the architect.”

The pair first met in 1959 and three years later Munger began working in money management, the letter notes. In 1978, Munger joined Berkshire Hathaway as vice-chairman and has sat by his side, quick with a quip or a sage piece of advice.

“Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades. In a way his relationship with me was part older brother, part loving father. Even when he knew he was right, he gave me the reins, and when I blundered he never – never – reminded me of my mistake,” wrote Buffett.

Munger’s passing has brought up the question of succession at Berkshire.

Buffett, 93, named Greg Abel, 61, as his heir apparent in 2021. Abel heads Berkshire’s non-insurance businesses, including its energy division, building materials and even candy divisions.

Buffett has worked to insure investors that Berkshire’s stock (BRK.A), which closed at $628,930.18 on Friday, has a strong succession plan is in place.

“I don’t have a second choice. I mean it is that tough to find. But I have also seen Greg in action and I feel 100% comfortable,” Buffett said at his shareholder meeting last year. “Greg is inheriting a good business and I think he’ll make it better.”

A strong year for Berkshire

Berkshire Hathaway reported a significant uptick in fourth quarter operating earnings. Operating income totaled $8.5 billion, up from $6.6 billion, or a 28.8% increase from a year ago. This brings its 2023 operating income up to $37.3 billion, from $30.8 billion in 2022.

The Omaha, Nebraska-based conglomerate also reported net earnings of $37.3 billion, and closed the year with a net profit of $96.2 billion, a sharp turnaround from 2022’s net loss of $22.8 billion.

Berkshire’s insurance underwriting business, one of its major holdings, made $848 million in the fourth quarter, up from $160 million in the same period a year prior. Overall, insurance underwriting generated earnings of $5.4 billion in 2023, up from a loss of $30 million in 2022.

Berkshire also bought back $2.2 billion in stock last quarter, bringing the year’s total to approximately $9.2 billion in stock repurchases.

Saturday’s report showed that Buffett is sitting on a record pile of cash. Berkshire has about $167.6 billion in cash and equivalents, breaking last quarter’s record-high $157.2 billion.

The stockpile has led some investors to speculate on whether Buffett is planning to acquire a new company to add to his portfolio.

Soft on Apple

Berkshire Hathaway sold off 10 million shares of Apple stock in the final three months of 2023, representing about 1% of its holdings in the tech giant.

Apple has been a major holding for Berkshire and is known as one of the so-called “four giants” — alongside its insurance, railroad and energy operations — which Buffett says drives most of Berkshire’s value.

Berkshire had also announced it had slightly trimmed its position in Apple in a recent regulatory filing with the Securities and Exchange Commission.

Filings also showed that Berkshire sold 80 million shares of printer company HP in the fourth quarter of 2023, reducing its holdings by 78%. It also pared off 32% of its holdings in media company Paramount.

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