In This Article:
Warren Buffett wasn't always the Warren Buffett so many people admire.
When he started assembling his Berkshire Hathaway conglomerate in the 1960s, he bought not-great companies at bottom-of-the-barrel prices and replaced the management.
Not long after, he became partners with the late Charlie Munger, who pointedly said cheap companies sold cheaply are cheap for a reason.
💰💸 Don’t miss the move: SIGN UP for TheStreet’s FREE Daily newsletter 💰💸
Better, to buy great companies at fair prices, Munger said. And here's the kicker: Whenever possible, keep the existing managers.
The result: Berkshire Hathaway (BRK.A) and (BRK.B) became a hugely successful company that has enriched investors far and wide. And it continues to make money. And, at least for now, Buffett will remain chairman.
Related: Is buying Palantir's stock now dumb?
But, as Buffett noted in his annual letter to shareholders, "At 94, it won’t be long before Greg Abel replaces me as CEO and will be writing the annual letters. "
However, Buffett intends to attend the company's annual meeting in Omaha, Neb., on May 3 as usual.
Fourth-quarter operating earnings (which don't include investment gains and losses) were up 71% to $14.5 billion. Full-year 2024 profit was $47.4 billion, up 27%.
Berkshire's Class A shares were off 0.6% to $718,750 on Friday, as stocks overall slumped. The Class B shares were down 0.6% to $478.74.
The shares for both classes are still up 5.6% year, ahead of the Standard & Poor's 500 Index's 2.2% gain.
Fair does not equal cheap
Does fair mean cheap? Not necessarily. Fair means the price for a business should reflect its value. If the results are solid, thus reflecting able management, and continue to do well, the value of the business (or investment) will increase and be reflected in the stock price.
Berkshire also invests in shares of companies and, given its size, takes big positions.
Lately, Berkshire Hathaway has unloaded a lot of stock, especially Apple (AAPL) , and is sitting on a cash horde of about $321.4 billion. That's roughly the size of the gross domestic product of the Czech Republic, according to the International Monetary Fund.
Berkshire had owned as many as 915 million shares of Apple as late as September 2023 and has cut the total to 300 million shares. As of Friday, the stake was worth $73.4 billion.
In all, Berkshire sold $143 billion in stocks it held for investment in 2024, up 253% from a year earlier, according to its annual report.
So, why cut the Apple stake? Maybe because Berkshire Hathaway was sitting on such huge gains in that one stake that Buffett and Greg Abel concluded prudence dictated it was time to look for new opportunities.