In the much talked-about Warren Buffett’s annual letter to shareholders, the ace investor wrote about some of the things which investors may find surprising — if not revelatory. Well, the conglomerate holds infrastructure assets to the tune of $158 billion, paid $3.3 billion in taxes in 2021, and importantly — Buffett doesn’t believe himself to be a ‘stock picker’. Let us find more on this.
Large basket of infra-assets
Several people perceive Berkshire as a large and strange collection of financial assets. In reality, the company owns and operates more US-based infrastructure assets which are classified on company’s balance sheet as plant, equipment and property – than any other US company.
Although the company holds stocks in some prominent new-age companies including a sizeable share in Apple, its share in infrastructure assets is colossal.
But Warren admits that although that supremacy was never their goal but the situation has emerged like that. “At year end, those domestic infrastructure assets were carried on Berkshire’s balance sheet at $158 billion. That number increased last year and will continue to increase. Berkshire always will be building,” wrote Mr Buffett.
Tax share
Buffett refers to the US Treasury as Berkshire’s silent partner which benefitted along with the company’s shareholders. While the company’s payment to the US Treasury was mere $100 daily, “Now, Berkshire pays roughly $9 million daily to the Treasury,” he wrote.
Every year, Mr Buffett-led organisation makes substantial federal income tax payments. In 2021, the company paid $3.3 billion while the US Treasury reported total corporate income-tax receipts of $402 billion. Along with this, the company pays huge state as well as foreign taxes.
Massive insurance float
It started in 1967 when the company made $8.6 million purchase of National Indemnity. And now, Berkshire has become the world leader in insurance ‘float’ – the money the company holds and can invest but that does not belong to it. In other words, it is the money insurance company has garnered in premium collection but not paid in claims.
“Including a relatively small sum derived from life insurance, Berkshire’s total float has grown from $19 million when we entered the insurance business to $147 billion,” he wrote.
Graciously, he gave the success of insurance business to India-born Ajit Jain who was — till recently — seen as one of the key contenders to the CEO's post . “Much of our huge value creation in insurance is attributable to Berkshire’s good luck in my 1986 hiring of Ajit Jain,” wrote Mr Buffett in the letter.
Not stock pickers
Berkshire owns a bouquet of businesses, some in totality, while others only in part. The second group largely comprises marketable common stocks of major US organisations. Also, Berkshire owns a few non-US equities and is party to a slew of joint ventures.
Notwithstanding the form of ownership, the company’s goal is to have meaningful investments in businesses.
While underscoring his long term commitment to the companies he invests into, he says that he believes in owning a part of business and not mere stocks. “That point is crucial: Charlie and I are not stock-pickers; we are business-pickers,” he wrote in the letter.
Berkshire owns stocks based upon their expectations about their long-term business performance, and not only because they see them as vehicles for timely market moves.