Investment icon Warren Buffett seemingly struck a new tone in his annual letter to Berkshire Hathway shareholders in regard to his trading strategy for the conglomerate's $122 billion portfolio of public equities.
Buffett also appended a line to the business principles that have appeared with each letter since 1983, saying that his aversion to selling businesses does not apply to public market securities, the Financial Times reported.
“It is true that we own some stocks that I have no intention of selling for as far as the eye can see (and we’re talking 20/20 vision). But we have made no commitment that Berkshire will hold any of its marketable securities forever,” Buffett wrote in the letter, which was posted early Saturday.
Buffett this year also noted that some of Berkshire’s largest equity positions were the work of his investment deputies, the former hedge fund managers Todd Combs and Ted Weschler, the FT reported.
"The tweaks appeared to Buffett-watchers to be a signal that Berkshire’s investment portfolio could become more fluid now that it has become less important to the company’s fortunes," the FT reported. "Berkshire long ago left behind its roots as a vehicle for Buffett’s stockpicking and is now one of the largest conglomerates on the planet," with businesses spanning insurance, utilities, railroads, manufacturing and more, the FT explained.
“Recent equities investments may prove to have been opportunistic,” Jim Shanahan, analyst at Edward Jones, told the FT. “Potentially, Mr Buffett is preparing investors for the possibility that they are going to trade in and out of names. That would appear inconsistent with Berkshire’s strategy, but it wouldn’t be inconsistent with what Combs and Weschler had done historically.”
Larry Cunningham, author of Berkshire Beyond Buffett, told the FT: “Big public equity positions are no longer what defines Berkshire and what Todd and Ted do is far less important than what the business managers do. The future of Berkshire is the operating companies.”
Meanwhile in the letter, Buffett also attacked what he saw as tricks used by U.S. companies to boost earnings and stock prices, but he defended one oft-criticized practice: share buybacks, Reuters reported.
"As the subject of repurchases has come to a boil, some people have come close to calling them un-American –characterizing them as corporate misdeeds that divert funds needed for productive endeavors," Buffett said in the letter to shareholders.
"That simply isn't the case: Both American corporations and private investors are today awash in funds looking to be sensibly deployed. I'm not aware of any enticing project that in recent years has died for lack of capital."
Some critics, including BlackRock Inc Chief Executive Officer Larry Fink, think the practice of companies buying back their own shares to boost earnings has been used to excess. Repurchasing shares boosts earnings per share by reducing the shares remaining on the market. Critics contend the money can be better used to hire employees or buy equipment.
Buybacks fell to an average $2.3 billion a day during the January-February earnings season, TrimTabs Investment Research Inc. data showed, after spiking to $5.7 billion a day in early-to-mid 2015.
Elsewhere, Buffett was less sanguine on other practices used by public companies, saying "too many" are deviating from generally accepted accounting principles (GAAP) to present better earnings numbers.
Buffett said it "makes us nervous" that companies regularly leave out what they call "restructuring costs" and "stock-based compensation" from their expenses, boosting profits by deviating from standard accounting practices.
"To tell owners year after year, 'Don't count this,' when management is simply making business adjustments that are necessary, is misleading. And too many analysts and journalists fall for this baloney."
(Newsmax wires services contributed to this report).