Sticking with US Stocks, Betting on Japan
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In a recent report, Berkshire Hathaway, the multinational conglomerate run by the renowned investor Warren Buffett, has showcased significant financial performance for the fiscal year of 2024. The company reported a staggering net profit attributable to shareholders totaling $88.995 billionAdditionally, Berkshire has reached a historic liquidity level with $334.2 billion in cash or cash equivalents, including short-term treasury securitiesBuffett, in his letter to shareholders, reaffirmed the company's commitment to reinvest a substantial portion of its funds into equities, primarily focusing on American stocksThis reflects a belief that savvy businesses and individuals can often navigate periods of monetary instability, which traditional fixed-income bonds may not withstand amidst rampant inflation.
Buffett expressed a continued interest in the Japanese market, highlighting Berkshire’s initial investment in Japan's five largest trading companies back in July 2019. Reinforcing the long-term nature of these holdings, he has also indicated an intention to increase investments in these Japanese trading firms in the futureBerkshire Hathaway adopts a unique approach when it comes to dividendsDespite the feasible option of distributing cash dividends to shareholders, Buffett urged investors to forgo immediate cash returns in favor of reinvestment strategies that have realized an astonishing growth of 55,022 times over 60 yearsThis has resulted in a compounded annual growth rate (CAGR) of 19.9%, greatly outperforming the S&P 500's return of 391 times, equating to an annualized return of 10.4%.
The company expressed pride over its tax contributions, having paid a massive $26.8 billion in taxes for the year 2024, which accounts for roughly 5% of the total tax contributions from corporations across the United StatesBuffett has emphasized Berkshire's role as a significant tax contributor, committed to maintaining substantial fiscal contributions in the years to come
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The intricate relationship between stock performance, liquidity, and taxes portrays Berkshire Hathaway not just as a profitable entity, but as a responsible corporate citizen focused on long-term economic health.
Buffett also commented on the unpredictable nature of currency values, asserting that while cash may lose its purchasing power, strong businesses and astute individuals can endure through fluctuating economic climatesThe company’s performance is informed not just by its holdings in listed companies, but also by its diverse portfolio of unlisted businesses that outstrip the market capitalization of its investmentsDespite a noted 53% decline in the profits of its 189 subsidiary companies, Berkshire has recognized robust returns from investments in short-term government bonds, while the profits from railroad and utility sectors continue to show positive trends although they necessitate further refinement.
Moreover, with the dollar’s resurgence, Berkshire Hathaway has benefited significantly from foreign exchange gains, netting an impressive $1.1 billion in 2024, a notable increase from $211 million in 2023. Interestingly, there has been a reduction in the market valuation of its publicly traded stocks, which fell from $354 billion to $272 billionThe insurance division has also remained a critical source of profit, yielding $32 billion in post-tax profits over 20 years while maintaining insurance float of $171 billion, sometimes at zero cost to the company.
Buffett anticipates a projected annual dividend of $810 million from Japan’s investments by 2025, while the interest cost of yen-denominated bonds is roughly $135 millionTo commemorate its enduring journey, a publication titled "Berkshire Hathaway: 60 Years" is slated for release during the company's 2025 annual shareholder meeting, potentially offering deeper insights into its historical performance and investment philosophy.
On a separate note, Intuitive Surgical has captured considerable market attention with its stock performance displaying a notable increase of approximately 13.4% this year, closing at $591.79 as of last Friday
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After reaching a historical peak of $610.45 on January 22, the stock experienced a minor decline, recently surpassing the $600 mark again before falling slightly below itThe company forecasts a significant growth trajectory in 2025 with a predicted increase of 13%-16% in da Vinci surgical procedures, further propelled by the comprehensive rollout of the da Vinci Surgical System, indicating increasing market acceptance and reliance on robotic surgical solutions.
Various financial institutions remain bullish regarding Intuitive Surgical's future, with Piper Sandler raising its price target to $670 while maintaining an "Overweight" ratingBernstein echoed a similar optimism, setting a price target of $700 under an "Outperform" assessmentTruist Securities also raised its target to $666 with a “Buy” recommendationAnalysts from Investing.com anticipate the stock could soar to an impressive $760.18 by the close of 2025. As a leader in surgical robotics, Intuitive Surgical's rise can be underscored by its commanding share of the market, capturing the lion's share of robotic surgery procedures, particularly through the da Vinci System.
Meanwhile, in other corporate news, AMD is in discussions to unload a data center manufacturing plant, valued between $3 billion and $4 billion, to multiple interested Asian firmsThese assets became part of AMD's portfolio through its acquisition of ZT Systems last yearTargeted prospective buyers include Compal, Inventec, Foxconn, and Wistron, with an announcement regarding the transaction potentially expected in the second quarter of this fiscal yearAMD's strategic pivot to sell manufacturing operations aligns with its intention to concentrate on highly profitable chip design, reducing direct competition with established servers from leading firms such as HP and Dell.
In the commodities market, cocoa futures experienced a substantial drop last week, providing potential positive implications for chocolate manufacturers
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