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Could the Qantas Airways Limited (ASX: QAN) share price be a buy after the airline released its FY21 half-year result.

What did Qantas announce?

The airline announced that it made an underlying loss before tax of $1.03 billion and a statutory loss before tax of $1.47 billion.

Qantas said that it suffered a $6.9 billion revenue impact from the COVID-19 crisis in the first half of FY21, which amounts to a 75% reduction.

Despite that, underlying operation cashflow was still $1.05 billion. It was the domestic airlines that generated positive underlying cashflow for Qantas. Whilst Qantas International is still suffering because of COVID-19 and closed borders, Qantas Freight is performing very strongly due to the limited number of passenger planes flying (which used to carry freight along with the passenger cargo).

The airline also said that Qantas Loyalty continues to generate good cashflow thanks to credit card spending, health insurance, Qantas Wine and the Qantas rewards store.

Cost cuts

A major feature of the report was cost savings. It’s looking to save a substantial amount of costs over the next three years, the target is at least $1 billion of permanent annual savings from FY23. The short-term target is $600 million of permanent savings for FY21, which Qantas said is on track.

This involves at least 8,500 people leaving the business. More than 5,000 have already left so far, with the remainder expected to have left by the end of FY21.

A total of 14,500 full time equivalent roles are now stood up while around 11,000 full time equivalent roles remain stood down, most of which are associated with international flying.

Qantas also said that significant permanent savings are also being achieved through new deals with major travel agents.

It’s looking at the rationalisation of the group’s property footprint, including the handback or subleasing of surplus office space. It also said that the finalisation of a major review, which includes Qantas and Jetstar head offices, is expected by the end of March.

Finally, Qantas said that it’s renegotiating its supplier deals, including expiring aircraft leases.

In terms of government support, it’s still receiving assistance. Jobkeeper payments are still going to employees who are not working. Support for regional and domestic passenger flights, and for some international freight routes, which would not otherwise have been commercially viable, helped to keep key transport links active.

Outlook

Qantas said that the recent border closures have delayed the group’s recovery by an estimated three months. However, it believes that international travel can restart by the end of October 2021, with the exception of increased travel with New Zealand expected for July 2021.

Domestic capacity is expected to rise to 80% of pre-COVID levels in the fourth quarter of 2021. Qantas is continuing to focus on managing the business to positive net free cash flow.

Broker opinions

UBS has a share price target of $6.20 for Qantas. The result was a little better than what the broker had been expecting. The state borders were temporarily shut off, but the Qantas liquidity didn’t fall. UBs thinks the market isn’t quite pricing in all of the potential cost cuts that the airline can achieve. 

However, Credit Suisse has a Qantas share price target of $3.90. The delay in the domestic recovery is a negative and the balance sheet will come under greater scrutiny. However, a change in the pace of recovery could change its views. 

More reading

• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings
• Top brokers name 3 ASX shares to buy next week
• Is the Qantas (ASX:QAN) share price great value?
• Air New Zealand (ASX:AIZ) share price flies after earnings devastated
• Qantas (ASX:QAN) share price on watch after $1.1 billion loss

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Calix Ltd (ASX: CXL) share price is surging higher today following the announcement that it has partnered with a Swedish company to begin a pilot energy storage system.

During the first minutes of market open, the tech company’s shares were up 14.6% to $2.35. At the time of writing, they have retreated to $2.21, up 7.8%.

Let’s take a closer look at what Calix reported to the ASX market this morning.

What’s driving the Calix share price higher?

The Calix share price is on the move today as investors digest the company’s latest update.

In this morning’s release, Calix advised it has entered into a partnership deal with SaltX Technology AB (SaltX).

Based in Sweden, SaltX builds and sells energy storage solutions. The group employs a specific technology that stores energy into salt crystals and converts them into heating or cooling. This can be used in solar-powered heating and cooling in buildings, electric buses and trucks, and even satellites.

Under the deal, SaltX will design and build a pilot 200kW electric-powered direct separation reactor (eDS) for Calix’s energy storage system. This will be similar to a BATMn reactor installed at its Bacchus Marsh facility in Victoria in 2019.

In addition to the agreement, Calix will provide SaltX with a non-exclusive, non-transferable limited licence to use the eDS reactor. The energy storage system will be tested sometime around FY22.

Calix will also undertake its own research to develop the eDS unit, leading to further collaboration for a larger 1MW capacity project, provided both companies can achieve the desired results for the pilot reactor.

While the release did not detail the agreement’s financial terms, the new partners believe that the joint teamwork will accelerate growth opportunity. They consider the development of efficient, low-cost energy storage systems to be a multi-billion market.

Management commentary

Calix managing director and CEO Phil Hodgson welcomed the new partnership, saying:

The use of Calix’s technology in base load energy storage systems was foreshadowed as we developed our SOCRATCES project in Europe – which is based upon solar-powered calcium looping and is progressing well. We are very pleased to be working with SaltX on its system now also. This system has great potential for load balancing applications as the grid de-carbonises.

SaltX CEO Carl-Johan Liner added:

Calix is a pioneer in developing sustainable solutions for many industries and therefore I believe this co-operation will have many benefits in SaltX mission of developing energy storage solutions that will have a real change for the renewable energy sector.

The Calix share price is up more than 150% in the past 12-month period.

More reading

• The Calix (ASX:CXL) share price rips 13% higher on revenue growth

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Terracom Ltd (ASX: TER) shares are sliding this morning following the company’s release of its FY21 half-year results (1H21). In the opening minutes of trade, the Terracom share price has slipped 7.14% to 13 cents. 

Let’s take a look at how the coal miner has been performing. 

What’s pushing the Terracom share price lower?

The Terracom share price is in negative territory this morning after the company posted a 1H21 loss after tax of $60.4 million, compared to a 1H20 loss of $9.4 million.

Annualised coal sales for 1H21 were down 0.2 million tonnes, a 7% drop compared to the prior corresponding period (pcp).

Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at a loss of $27.5 million. This compares to a $27.8 million EBITDA profit in HY20.

Terracom’s earnings per share (EPS) for 1H21 was negative 6.94 cents compared to EPS of negative 1.96 cents in 1H20.

In other news putting pressure on the Terracom share price, the business reported $350.7 million of total assets at the end of the period as opposed to $630.3 million of total assets in the pcp.

CEO commentary and outlook

Commenting on the financial results for 1H21, Terracom chief executive officer Danny McCarthy said:

The current economic environment has been very uncertain and as a consequence the financial result from 1H FY2021 is somewhat disappointing. Strategic actions undertaken throughout the first half of 2020 saw the Company transform via the acquisition of Universal Coal plc and also the consolidation and restructure of our Australian operation…

From an operational perspective, the Company is in very good shape and will be able to overcome the uncertainties associated with the ongoing economic challenges. Underpinning this is the sustained reduced cost base at Blair Athol, a newly established export strategy in South Africa and improved export coal pricing, the Company is set to deliver stronger EBITDA results for the remainder of the financial year.

Terracom share price snapshot

Terracom is a resource explorer with a large portfolio of assets in Australia and South Africa. Over the past year, the Terracom share price has fallen by 35%. Year to date, Terracom shares have also dropped by around 24%.

Based on the current share price, the company has a market capitalisation of approximately $105.5 million with 753.6 million shares outstanding.

More reading

• Here’s why the ANZ (ASX:ANZ) share price is underperforming today
• Why the Fortescue (ASX:FMG) share price is sinking 6% today
• Here’s why the Austal (ASX:ASB) share price is storming 6% higher
• Why the Mesoblast (ASX:MSB) share price is on watch this week
• Here’s how Freedom Foods (ASX:FNP) performed in the first half

Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price is underperforming its peers on Monday.

At the time of writing, the banking giant’s shares are up ever so slightly to $26.22. This compares to a 1% gain by the Commonwealth Bank of Australia (ASX: CBA) share price.

Why is the ANZ share price underperforming?

This morning ANZ released an update in relation to news that AmBank has made an agreement with the Malaysian Ministry of Finance to resolve potential claims relating to its involvement with 1Malaysia Development Berhad (1MDB).

According to Reuters, the Malaysian bank will pay the government 2.83 billion ringgit (~US$700 million) to settle claims linked to a massive financial scandal at 1MDB.

1MDB is a state fund set up in 2009 by former prime minister Najib Razak. AmBank has been under investigation for its role in the alleged theft of US$4.5 billion from 1MDB.

Mr Najib was also under investigation and ultimately found guilty of corruption and money laundering over the transfer of millions of dollars linked to a 1MDB unit into his AmBank accounts between 2014 and 2015. Though, the former prime minister denies any wrongdoing and has filed an appeal.

In response to the agreement, AmBank said: “While this will have a material impact on the current year’s profitability, there are adequate capital buffers to absorb this settlement without an immediate need to raise additional equity capital.”

The finance ministry will also require AmBank to take corrective measures, as part of the settlement. This includes putting in place systems and processes to strengthen its due diligence framework.

How does this impact ANZ?

This morning ANZ revealed that the impact on its CET1 capital position will be neutral given its investments in associates are already a full deduction to capital.

However, the financial impact on ANZ of $212 million will be recorded as part of the equity accounted earnings from AmBank in its first half accounts. This will reduce the carrying value of ANZ’s interest in AmBank from ~$1.050 billion to ~$850 million.

More reading

• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings
• Why ANZ (ASX:ANZ) shares could be perfect for income investors
• Leading brokers name 3 ASX shares to buy today
• ASX 200 Weekly Wrap: ASX lower despite bumper dividends
• Is the ANZ (ASX:ANZ) share price a buy?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Fortescue Metals Group Limited (ASX: FMG) share price has come under pressure on Monday.

In morning trade, the iron ore producer’s shares are down 6% to $22.72.

Why is the Fortescue share price sinking today?

The good news for shareholders is that today’s decline has nothing to do with the company’s performance or the iron ore price.

This decline is entirely attributable to the fact that the Fortescue share price is trading ex-dividend today.

When a share trades ex-dividend, it means that it is trading without the rights to an upcoming dividend. In light of this, anyone buying shares from between now and the dividend payment date, will not be receiving the distribution.

As a result, a share price will generally drop in line with the dividend being paid to reflect this.

The Fortescue dividend

Last month Fortescue released its half year results and revealed a 44% increase in revenue to US$9,335 million and a 66% lift in net profit after tax to US$4,084 million.

This strong form allowed the Fortescue board to declare a fully franked interim dividend of $1.47 per share, up a massive 93.4% on the prior corresponding period.

Based on the Fortescue share price at Friday’s close, this interim dividend represents a 6% yield. This is roughly in line with the drop its shares have made this morning.

Eligible shareholders can now look forward to being paid this monster dividend in just over three weeks on 24 March.

Other shares going ex-dividend

Fortescue isn’t the only company that has shares going ex-dividend this morning.

Also trading ex-dividend are Credit Corp Group Limited (ASX: CCP) shares, Evolution Mining Ltd (ASX: EVN) shares, and Worley Ltd (ASX: WOR) shares.

As with Fortescue, these three shares are also trading lower on Monday morning.

More reading

• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings
• 5 things to watch on the ASX 200 on Monday
• Why outperforming ASX resources shares will be in the hotseat on Monday
• The big themes from ASX reporting season
• 2 top ASX dividend shares with massive yields

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Austal Limited (ASX: ASB) share price is on the move on Monday morning.

At the time of writing, the shipbuilder’s shares are up 6.5% to $2.53.

Why is the Austal share price on the rise?

Investors have been buying Austal shares today following the release of an announcement.

According to the release, Austal’s Philippines business has successfully delivered Hull 419 to Fjord Line of Norway.

The 109 metre high-speed catamaran vehicle-passenger ferry, named FSTR, is the largest aluminium vessel ever constructed in the Philippines. It is also currently the largest ferry (by volume) to be constructed by Austal, at any of the company’s shipyards worldwide.

FSTR is capable of transporting 1,200 passengers at up to 40 knots and features Austal’s largest ever vehicle-carrying capacity constructed to date. It has a beam of 30.5 metres enabling 404 cars to be carried across two decks.

Furthermore, the ship features several key design innovations that enhance operating performance and passenger comfort. This includes a new, optimised hull form that will minimise fuel consumption and wake wash when operating on the Skagerrak Sea between Hirtshals, Denmark and Kristiansand, Norway.

Austal’s Chief Executive Officer, Paddy Gregg, was pleased with the delivery, especially given the tough operating conditions it has been facing because of COVID-19.

He said: “It’s impressive to see a large high speed ferry like this delivered in the best of times, but for the team to deliver this new vessel during a global pandemic is simply outstanding. The Austal Philippines team has clearly demonstrated its ability to deliver multiple, complex projects under challenging circumstances, while maintaining a safe working environment.”

What’s next?

The delivery of FSTR was just the first of three large high-speed ferries to be constructed at the company’s newly expanded shipyard.

Austal Philippines President, Wayne Murray, commented: “With the delivery of FSTR, we’re now preparing for the launch of Hull 395, Bañaderos Express; a 118 metre trimaran ferry under construction for Fred. Olsen Express of the Canary Islands. Following closely behind that, we have the 115 metre Express 5 under construction for Molslinjen of Denmark.”

Despite today’s gain, the Austal share price is down 27% over the last 12 months.

More reading

• Here are 3 ASX 200 diamonds in the spotlight while the market sank today
• Austal (ASX:ASB) share price on watch following profit surge
• ASX 200 goes higher, Afterpay sinks, Adbri impresses
• Why the Austal (ASX:ASB) share price got torpedoed today
• Why Afterpay, Austal, Perenti, & SEEK shares are tumbling lower

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Mesoblast limited (ASX: MSB) share price will be on watch today if it returns from its trading halt.

This follows the announcement of its half year results and an equity-based private placement at the end of the week.

How did Mesoblast perform in the first half?

For the six months ended December 31, Mesoblast reported revenue of US$3.5 million and a loss after tax of US$48.9 million.

In respect to cash flows, the company revealed a net cash outflow from operations of US$60.1 million. This left Mesoblast with total cash and cash equivalents of US$77.5 million at the end of the period.

In light of its dwindling cash balance, the company advised that it has commenced a proposed equity-based private placement to a targeted industry investor to fund operations.

The placement

Mesoblast company is working to raise a rumoured US$100 million from a targeted industry investor.

According to the release, the proceeds from the offering will be used for working capital and to prepare for confirmatory trials in lead programs as per FDA requirements.

In addition, management notes that proceeds will enable the continued investment in manufacturing for further clinical development and to optimise process development including 2D and 3D bioreactor technologies. This is in preparation for commercial scale manufacturing, as well as maintenance of minimum unrestricted cash balances as required under our loan agreements.

What about the future?

Concerns about the company’s dwindling cash balance have been weighing heavily on the Mesoblast share price in recent months. And it isn’t hard to see why.

Management warned: “During the next twelve months, the Group intends to achieve cash inflows from existing strategic and financing partnerships, subject to the Group meeting future milestones and other performance conditions. Some or all of these cash inflows will be required for us to meet our forecast expenditure and continue as a going concern, although there is uncertainty related to our ability to access these cash inflows because the meeting of milestones and other performance conditions are not wholly within the Group’s control.”

“Management and the directors believe that the Group will be successful in the above matters and, accordingly, have prepared the financial report on a going concern basis, notwithstanding that there is a material uncertainty that may cast significant doubt on our ability to continue as a going concern and that the Group may be unable to realize our assets and discharge our liabilities in the normal course of business. is a material uncertainty that may cast significant doubt on our ability to continue as a going concern and that the Group may be unable to realize our assets and discharge our liabilities in the normal course of business.”

More reading

• 5 things to watch on the ASX 200 on Monday
• Why is the Mesoblast (ASX:MSB) share price frozen?
• These are the 10 most shorted shares on the ASX
• These are the 10 most shorted shares on the ASX
• Mesoblast (ASX:MSB) share price surges on new results

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Freedom Foods Group Ltd (ASX: FNP) share price may have been suspended since June but that doesn’t mean everything stops.

This morning the diversified food company released its half year results for FY 2021.

How is Freedom Foods performing?

For the six months ended 31 December, Freedom Foods reported a 15% increase in revenue from continuing operations to $291.4 million.

This was driven by a 17% increase in Plant-based Beverage revenue to $75.2 million and a 15% lift in Dairy and Nutritionals revenue to $209.8 million. Their positive performances more than offset a 5% decline in Specialty Seafood revenue.

In respect to earnings, the company reported a 21% lift in earnings before interest, tax, depreciation and amortisation (EBITDA) to $15.2 million.

Things weren’t quite as positive on the bottom line, though. Freedom Foods posted a loss after tax from continuing operations of $15.2 million. However, this was an improvement from a (restated) loss of $50.2 million a year earlier.

Management commentary

Freedom Foods’ Interim Chief Executive Officer, Michael Perich, said: “These results demonstrate the potential of the businesses within Freedom Foods Group, with both our Dairy and Nutritionals and Plant-based Beverages operations delivering solid growth and positive operating earnings in a challenging period.”

“Most importantly, the results show the financial and operational turnaround strategy underway across the Company is beginning to gain traction. By working hard to remove complexity across the business – as well as improving our culture, governance and accountability – we are able to focus our attention on the brands and products with the greatest potential.”

“Despite the ongoing impact of COVID-19 and associated lockdowns on our key markets, particularly the out-of-home channel, our flagship brands, including MILKLAB, Australia’s Own and PUREnFERRIN lactoferrin continue to deliver strong growth. We will look to continue growing sales, with further penetration of MILKLAB in the out-of-home market, growth of Vital Strength and other nutritionals brands and increasing inroads in Asian export markets.”

Outlook

Mr Perich appears optimistic on the future.

He commented: “While there remains a lot of work to be done to ensure Freedom Foods Group can meet its full potential, these results validate our decision to focus on building a world-class business around our market-leading Dairy and Nutritionals and Plant-based Beverages brands.”

“Once the recapitalisation is complete, we will have a capital structure that allows us to continue to focus on delivering on our turnaround strategy and restore the Group to sustainable and long-term profitable growth.”

The company revealed that progress on recapitalisation continues to be made, with an update to be provided mid-March. Until then, the Freedom Foods share price will remain in voluntary suspension.

More reading

• What you need to know about the CSL (ASX:CSL) dividend
• 3 key takeaways from Warren Buffett’s latest letter to shareholders
• Top ASX shares to buy in March 2021
• These were the worst performing ASX 200 shares in February
• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Freedom Foods Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Last week blood products giant CSL Limited (ASX: CSL) unveiled a huge double-digit growth in sales and profit in its half-year results to 31 December 2021. The company also added over US$1.2 billion in cash and announced an increase to its interim dividend.

If you’re considering buying CSL shares for their dividend potential, here are some important things to know.

What is CSL’s dividend yield?

In its recent half-year results, CSL declared an interim dividend of US$1.04 per share for the six months to 31 December 2020. This was up 9.5% on the same corresponding period and, based on current exchange rates, suggests CSL has a trailing dividend yield of around 1.0%, unfranked.

When does CSL pay its dividend?

The CSL share price will go ex-dividend on Thursday 4 March 2021.  The ‘ex-date’ is when the shares start selling without the value of their next dividend payment, so an investor needs to own the shares before the ex-date to receive the dividend. The dividend will then be paid on Thursday 1 April 2021.

What does the company’s dividend history look like?

It’s interesting to look at how CSL’s dividend has performed over the last few years. In fact, as you can see from the chart below, CSL has an impressive track record of growth when it comes to paying annual cash dividends over the last eight and a half years:

Source: chart compiled by the author, data from CSL.

How much of its earnings does CSL payout?

Over the last 12 months, CSL has reported dividends totalling US$2.11 per share, while the company’s reported earnings per share (EPS) over the same period were US$5.86. From this, we can see that CSL will be paying out about 36% of its earnings for the last 12 months. This might fluctuate more or less over time. For the full 2020 financial year, CSL actually paid out a slightly higher percentage of around 44% of earnings per share.

If a company is paying out more in dividends than it is earning, this could be a warning sign that the dividend may not be sustainable over the long term.

More reading

• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings
• 2 of the best ASX 200 blue chip shares to buy
• 3 ASX blue chip shares that just raised their dividends
• ASX 200 Weekly Wrap: ASX lower despite bumper dividends
• 2 of the best ASX 200 results from last week

Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Warren Buffett has just released his eagerly anticipated letter to Berkshire Hathaway shareholders.  As always, the letter was filled with a number of investment gems and lessons. 

Three key takeaways from the letter this year are summarised below:

Own and then learn from your mistakes

Even the Oracle of Omaha makes investment mistakes. When this happens, he owns the mistake and tries to learn from it. In this year’s letter, the 2016 acquisition of Precision Castparts was labelled a “a big one.”

“The final component in our GAAP figure – that ugly $11 billion write-down – is almost entirely the quantification of a mistake I made in 2016. That year, Berkshire purchased Precision Castparts (“PCC”), and I paid too much for the company.

No one misled me in any way – I was simply too optimistic about PCC’s normalized profit potential. Last year, my miscalculation was laid bare by adverse developments throughout the aerospace industry, PCC’s most important source of customers.

In purchasing PCC, Berkshire bought a fine company – the best in its business. Mark Donegan, PCC’s CEO, is a passionate manager who consistently pours the same energy into the business that he did before we purchased it. We are lucky to have him running things.

I believe I was right in concluding that PCC would, over time, earn good returns on the net tangible assets deployed in its operations. I was wrong, however, in judging the average amount of future earnings and, consequently, wrong in my calculation of the proper price to pay for the business. PCC is far from my first error of that sort. But it’s a big one.”

Retained earnings can build value

Some investors may be disappointed when companies don’t always pay out as much of their earnings as they would like. For example, last month Breville Group Ltd (ASX BRG) delivered record half year profits but reduced its payout ratio.

Buffett used his letter to remind investors of the power of retained earnings to create value. Berkshire Hathaway has famously only ever paid one dividend in its history and that was deemed a mistake by Buffett.

“As I’ve emphasized many times, Charlie and I view Berkshire’s holdings of marketable stocks – at yearend worth $281 billion – as a collection of businesses. We don’t control the operations of those companies, but we do share proportionately in their long-term prosperity. From an accounting standpoint, however, our portion of their earnings is not included in Berkshire’s income. Instead, only what these investees pay us in dividends is recorded on our books. Under GAAP, the huge sums that investees retain on our behalf become invisible.”

What’s out of sight, however, should not be out of mind: Those unrecorded retained earnings are usually building value – lots of value – for Berkshire. Investees use the withheld funds to expand their business, make acquisitions, pay off debt and, often, to repurchase their stock (an act that increases our share of their future earnings). As we pointed out in these pages last year, retained earnings have propelled American business throughout our country’s history. What worked for Carnegie and Rockefeller has, over the years, worked its magic for millions of shareholders as well.”

Get rich patiently

With day trading growing in popularity thanks to things like the GameStop-Reddit short squeeze, Buffett reminded investors of Berkshire Hathaway’s investment strategy of growing wealth for shareholders patiently over the long term.

“In 1958, Phil Fisher wrote a superb book on investing. In it, he analogized running a public company to managing a restaurant. If you are seeking diners, he said, you can attract a clientele and prosper featuring either hamburgers served with a Coke or a French cuisine accompanied by exotic wines. But you must not, Fisher warned, capriciously switch from one to the other: Your message to potential customers must be consistent with what they will find upon entering your premises.

At Berkshire, we have been serving hamburgers and Coke for 56 years. We cherish the clientele this fare has attracted.

The tens of millions of other investors and speculators in the United States and elsewhere have a wide variety of equity choices to fit their tastes. They will find CEOs and market gurus with enticing ideas. If they want price targets, managed earnings and “stories,” they will not lack suitors. “Technicians” will confidently instruct them as to what some wiggles on a chart portend for a stock’s next move. The calls for action will never stop.

However, Buffett warned:

“Still, investors must never forget that their expenses are Wall Street’s income. And, unlike my monkey, Wall Streeters do not work for peanuts.

When seats open up at Berkshire – and we hope they are few – we want them to be occupied by newcomers who understand and desire what we offer. After decades of management, Charlie and I remain unable to promise results. We can and do, however, pledge to treat you as partners.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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