Buffett's buyback jab gets strong reviews from CNBC guests

Warren Buffett's shareholder letter criticism of "economic illiterate" politicians who are critical of all corporate stock buybacks generated a lot of discussion this week on CNBC.

Several guests joined Buffett in defending buybacks against criticism by some Democrats, including President Biden, who argue that companies should prioritize investing in workers and communities.

On "Squawk on the Street," Jim Cramer called Buffett's choice of words "incendiary," but said his argument that buybacks have often benefitted shareholders is "well-reasoned," adding, "I wish that the people who have been anti-buyback would read it, and I think that they would change their minds."

Asked if Buffett should have "called out [President Biden] by name," Cramer replied, "I don't think you want to be known as calling the president an idiot. I don't think that helps if you believe in the American system."

Empire Financial Research editor Herb Greenberg, appearing on "Power Lunch," said he "tilts left," but thinks buybacks are an "easy scapegoat" for politicians.

Ed Yardeni, the author of a book on buybacks, said on "The Exchange":

"This notion that the buybacks are at the expense of employee compensation or that it's at the expense of proper capital spending is ridiculous, because the reality is that, particularly now in this very tight labor market, workers are certainly getting their share of the pie, and at the same time, corporate capital spending has been basically at a record high."

White House: Biden isn't one of the 'silver-tongued demagogues'

In Saturday's letter, Buffett emphasized the word "all" with italics when he wrote, "When you are told that all repurchases are harmful to shareholders ... you are listening to either an economic illiterate or a silver-tongued demagogue."

In response, the White House says Biden is not against all buybacks.

In an interview with MarketWatch, the deputy director of Biden’s National Economic Council, Bharat Ramamurti, said:

"That’s not the president’s position. The president has been very clear that he’s not out there proposing to ban all stock buybacks or anything like that...

"We do not hold the position that [Buffett] is criticizing there."

Noting that the percentage of corporate earnings going to dividends and buybacks has increased from roughly 50% in the early '80s to more than 90% now, Ramamurti said Biden's proposal to increase the federal tax on buybacks from 1% to 4% reflects his concern "about the ratio or the imbalance between that reinvestment and the amount that goes to buybacks, and his entire policy agenda is about trying to reset the incentives a little bit."

As Buffett's letters get shorter, some readers want more substance

While the section on buybacks got a lot of attention, the lack of substantive comments on other topics left some wanting more.

In a Barron's piece headlined "Warren Buffett’s Letter Ducked Some Big Issues," Andrew Bary called the letter a "disappointment" without "a lot of insight."

"The eagerly anticipated missive released Saturday didn't address some key issues, including the slowdown in stock buybacks at Berkshire Hathaway, the troubles at Geico, and succession."

Bary would also have liked details on the investment performance of portfolio managers Todd Combs and Ted Weschler.

Reuters Breakingviews columnist Jeffrey Goldfarb complained that Buffett "mostly trotted out his greatest hits ... a sign the ageing investing rockstar may have run out of new material."

Writing for Seeking Alpha, Gary Gambino called the letter "shocking ... in terms of what was left out and what was rehashed."

He was disappointed that "for the first time ever, [there was] no quantitative data on the stock portfolio" or commentary on the performance of Berkshire's fully-owned businesses.

Berkshire now owns 80% of travel center operator Pilot

There was some news tucked away deep in Berkshire's 10-K filing.

It reveals that the company paid approximately $8.2 billion at the end of January for the additional 41.4% of Pilot that it agreed to buy this year as part of its 2017 deal to acquire 38.6% of the travel center operator for an undisclosed amount, estimated to have been around $3.5 billion.

Berkshire says it valued the initial investment at $3.2 billion as of December 31.

The Haslam family, which includes Cleveland Browns owner Jimmy Haslam, retains the remaining the 20% of the company, and according to a 2017 news release will "remain involved."

REUTERS/Gary McWilliams

In an interview on CNBC's "Squawk Box" in October 2017, Haslam said Berkshire was a good fit because Buffett is a "hands off" long-term investor "who wants us to maintain the culture."

In addition, he noted that Berkshire would have "plenty of capital" if there is an opportunity to grow the company.

Because Berkshire now owns a majority of Pilot, it says it will include that company's financials in its own statements, starting with its Q1 report.

Berkshire's BNSF joins 'Close Call' reporting system

At the urging of Transportation Secretary Pete Buttigieg, Berkshire Hathaway's BSNF is one of seven big freight railroad companies joining the voluntary "Confidential Close Call Reporting System" in the wake of the derailment of a Norfolk Southern train carrying dangerous chemicals in East Palestine, Ohio.

Reuters reports it is designed to encourage employees to report on safety hazards by protecting them from potential reprisals.

Drone footage shows the freight train derailment in East Palestine, Ohio, February 6, 2023 (NTSB via Reuters)

This week, a bipartisan group of senators introduced a rail safety bill that would strengthen safety requirements for trains carrying hazardous materials and increase the frequency of rail car inspections.

BUFFETT AROUND THE INTERNET

Some links may require a subscription

• CNBC Pro (subscription): UBS says Berkshire Hathaway is still an attractive play after earnings miss, sees 20% gain ahead

• GlobeNewswire (news release): Genius Brands to Release New Warren Buffett’s Secret Millionaires Club Minis, Produced by Genius AI Studio

• Wall Street Journal (subscription): Warren Buffett’s Slap at Buyback Illiterates Rings True

• Bloomberg (subscription): What You Can Learn From Warren Buffett’s Mistakes 

• Yahoo Finance: Numbers dive: Warren Buffett's performance is even more amazing than you think

• Benzinga: Elon Musk's Investment Advice To Warren Buffett — Invest In Company That 'Starts With A T...'

BERKSHIRE STOCK WATCH

BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Mar. 3, 2023

Berkshire's top holdings of disclosed publicly-traded U.S. stocks, and BYD, by market value, based on today's closing prices.

Holdings are as of December 31, 2022 as reported in Berkshire Hathaway’s 13F filing on February 14, 2023, except for:

• Apple, Bank of America, and Chevron, which also include shares held as of December 31, 2022 as disclosed in New England Asset Management’s 13F filing on February 14, 2023
• BYD, which is as of February 3, 2023

The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.

QUESTIONS OR COMMENTS

Please send any questions or comments about the newsletter to me at alex.crippen@nbcuni.com. (Sorry, but we don't forward questions or comments to Buffett himself.)

If you aren't already subscribed to this newsletter, you can sign up here.

Also, Buffett's annual letters to shareholders are highly-recommended reading. There are collected here on Berkshire's website.

-- Alex Crippen, Editor, Warren Buffett Watch