Warren Buffett, the CEO of Berkshire Hathaway, recently released his annual letter to shareholders, in which he honored his late business partner Charlie Munger and criticized stock-market gamblers. Buffett described Munger as the “architect” of Berkshire Hathaway, crediting him with shaping the conglomerate into a world-beating company. Munger passed away in November at the age of 99.
Buffett also highlighted four of Berkshire Hathaway’s biggest investments, emphasizing the company’s long-term investing style. He praised their large stakes in Coca-Cola and American Express, which have remained untouched for over two decades, as examples of successful long-term investments. Buffett also commended Occidental Petroleum, in which Berkshire Hathaway has built a nearly 28% stake in the past two years, for its support of US energy independence and carbon-capture methods. Additionally, he celebrated Berkshire’s approximately 9% stakes in five Japanese trading houses for their conservative management and disciplined approach to dividends.
However, Buffett expressed frustration with the challenges of finding new investment opportunities for Berkshire Hathaway due to its massive size. With $561 billion of net assets at the end of December, Berkshire Hathaway is the largest American company, making it difficult to make purchases that significantly impact its growth. Buffett acknowledged that there are only a handful of companies capable of moving the needle for Berkshire Hathaway, and they have already been extensively analyzed by both Berkshire and other investors.
In his letter, Buffett also criticized stock-market gamblers and speculators, noting that markets now exhibit more casino-like behavior than when he was younger. He pointed out that the proliferation of stock-trading apps has made daily buying and selling easier than ever, tempting individuals to engage in risky behavior. Buffett emphasized that Berkshire Hathaway shareholders should be long-term holders rather than individuals seeking quick gains through speculative investments.
Furthermore, Buffett dismissed the predictions and advice of market pundits, stating that they should always be ignored. He questioned why these experts would share their forecasts if they were certain of their accuracy, likening it to finding gold and then revealing its location to others. Buffett’s skepticism towards market predictions aligns with his belief in long-term investing and the importance of avoiding short-term market fluctuations.
In a lighthearted moment, Buffett pondered why Omaha, Nebraska, his hometown, has produced several successful investors and business leaders, including himself, Munger, Ajit Jain, Greg Abel, and his sister, Bertie. He humorously speculated whether there was something in Omaha’s water or air that contributed to their success or if it was a mysterious phenomenon yet to be explained by artificial intelligence.
Overall, Buffett’s annual letter reflects his commitment to long-term investing, his admiration for Charlie Munger’s contributions to Berkshire Hathaway, and his concerns about the behavior of stock-market gamblers. While acknowledging the challenges of finding new investment opportunities for Berkshire Hathaway, Buffett remains steadfast in his belief in the company’s long-term success.