Gerard Miller | CNBC
Warren Buffett, the 90-year-old "Oracle of Omaha", continues to believe in the American dream and says in his closely watched annual letter to shareholders: "Never bet against America".
"In the short 232 years of its existence … there has been no incubator to unleash human potential like America," wrote the chairman and CEO of Berkshire Hathaway in the letter posted on Saturday. "Despite some serious interruptions, our country's economic progress has been breathtaking. Our unshakable conclusion: Never bet against America."
Buffett shared a fact in the letter to illustrate Berkshire's American references. He said the conglomerate owned the largest amount of U.S. assets by value than any other company in the country.
"Berkshire's amortized cost of these domestic" fixed assets "is $ 154 billion. Next on that list is AT&T, with $ 127 billion in property, plant and equipment," he wrote.
Don't overlook Central America
The billionaire highlighted Berkshire's two wholly-owned American companies – BNSF Railway and Berkshire Hathaway Energy (BHE) – which made $ 8.3 billion in 2020 despite a drop in demand as a result of the Covid-19 pandemic.
"Your railroad carries approximately 15% of all non-local tonne-miles (one tonne of cargo moved one mile) of goods carried in the United States, whether by rail, truck, pipeline, barge, or plane," Buffett said. "The history of the American railways is fascinating. After around 150 years of frantic construction work, skull digging, superstructures, bankruptcies, restructurings and mergers, the railroad industry finally turned out to be fully developed and rationalized a few decades ago."
Buffett believes BHE will lead the way in providing clean energy in the future. BHE began a $ 18 billion effort to revamp and expand a substantial portion of the outdated network that now carries power across the west, Buffett noted.
"Unlike railroads, our country's electricity suppliers need a major overhaul, with final costs fluctuating," Buffett said in the letter. "The effort will absorb all of BHE's revenue in the decades to come. We welcome the challenge and believe that the additional investment will be adequately rewarded."
And Buffett reminded investors that, despite the great attention paid to coastal areas, miracles are happening in Central America. After all, the legend founded his conglomerate in Omaha, Nebraska, and his home office is still in the state of Cornhusker.
"There are many success stories across America," said the investor. "Since the birth of our country, people with an idea, ambition and often only a small portion of the capital have succeeded beyond their dreams by creating something new or improving the customer experience with something old."
Not a fan of bonds
On the subject of investing, Buffett said that extremely low interest rates around the world hurt the attractiveness of the bond market.
"Bonds aren't the place these days," Buffett said. "Fixed income investors worldwide – whether pension funds, insurance companies or retirees – face a bleak future."
Buffett noted that the benchmark 10-year government bond yield had fallen dramatically to 0.93% in late 2020, from 15.8% in September 1981. In Germany and Japan, investors generate negative returns on trillion US dollar government bonds, he added.
The "Oracle of Omaha" also made a surprise announcement at its upcoming annual general meeting, which will be held in Los Angeles on May 1st. It was the first time the gathering has taken place outside of Omaha. Vice Chairman Charlie Munger, who lives in Los Angeles, missed the 2020 annual meeting due to travel restrictions in the pandemic.
Berkshire repurchased nearly $ 9 billion in additional shares in the fourth quarter of 2020, bringing the company's buybacks to $ 24.7 billion last year – a record year for buybacks.
Buffett started the bargain hunt during the market comeback. He recently held a sizable position in Chevron, a classic value game, adding Verizon as well as a handful of medicines. Apple remains the conglomerate's largest common stock investment, which played an important role in offsetting the pandemic damage inflicted on Berkshire's railroad and insurance business in 2020.
While the buyback strategy seems to be paying off, some investors looking for a succession update or details of Buffett's next big acquisition may be a little disappointed with the letter. The conglomerate is still sitting on a huge cash box with more than $ 138 billion at the end of 2020.
Buffett noted that the other Berkshire Vice Chairs, Ajit Jain and Greg Abel, will be available at the annual meeting to answer questions as well.
Subscribe to CNBC PRO for exclusive insights and analysis as well as live business day programs from around the world.