Warren Buffett’s Annual Letter Reveals the Secrets and Lessons Behind $930 Billion Berkshire Hathaway

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Billionaire Warren Buffett, the 93-year-old chairman and CEO of investment firm Berkshire Hathaway, released his latest annual letter to shareholders on Saturday.

In the letter, Buffett discussed investment strategies, success stories, and lessons learned this past year at Berkshire Hathaway, which hit a record-high $930 billion market capitalization on Monday. He also honored Charlie Munger, who passed away in November at 99 years old, for architecting and helping run Berkshire.

Here are some key takeaways from Buffett’s letter, in his own words.

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What Berkshire Does

“Our goal at Berkshire is simple: We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring. Within capitalism, some businesses will flourish for a very long time while others will prove to be sinkholes. It’s harder than you would think to predict which will be the winners and losers. And those who tell you they know the answer are usually either self-delusional or snake-oil salesmen.”

The Company’s Investment Rule

“One investment rule at Berkshire has not and will not change: Never risk permanent loss of capital. Thanks to the American tailwind and the power of compound interest, the arena in which we operate has been – and will be – rewarding if you make a couple of good decisions during a lifetime and avoid serious mistakes.

I believe Berkshire can handle financial disasters of a magnitude beyond any heretofore experienced. This ability is one we will not relinquish. When economic upsets occur, as they will, Berkshire’s goal will be to function as an asset to the country – just as it was in a very minor way in 2008-9 – and to help extinguish the financial fire rather than to be among the many companies that, inadvertently or otherwise, ignited the conflagration.”

Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc. Daniel Acker/Bloomberg via Getty Images

Two Long-Term Assets: Coca-Cola and American Express

“During 2023, we did not buy or sell a share of either AMEX or Coke – extending our own Rip Van Winkle slumber that has now lasted well over two decades. Both companies again rewarded our inaction last year by increasing their earnings and dividends. Indeed, our share of AMEX earnings in 2023 considerably exceeded the $1.3 billion cost of our long-ago purchase.

The lesson from Coke and AMEX? When you find a truly wonderful business, stick with it. Patience pays, and one wonderful business can offset the many mediocre decisions that are inevitable.”

Railroad Investments

“BNSF is the largest of six major rail systems that blanket North America… Last year BNSF’s earnings declined more than I expected, as revenues fell. Though fuel costs also fell, wage increases, promulgated in Washington, were far beyond the country’s inflation goals. This differential may recur in future negotiations.”

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Buffett Says Berkshire’s Insurance Business Performed ‘Exceptionally Well’

“Enough about problems: Our insurance business performed exceptionally well last year, setting records in sales, float and underwriting profits. Property-casualty insurance (“P/C”) provides the core of Berkshire’s well-being and growth. We have been in the business for 57 years and despite our nearly 5,000-fold increase in volume – from $17 million to $83 billion – we have much room to grow.”

A Success Story (About Buffett’s Sister, Bertie)

“As a final punctuation point to the ‘Omaha Effect,’ Bertie – yes that Bertie – spent her early formative years in a middle-class neighborhood in Omaha and, many decades later, emerged as one of the country’s great investors.

You may be thinking that she put all of her money in Berkshire and then simply sat on it. But that’s not true. After starting a family in 1956, Bertie was active financially for 20 years: holding bonds, putting 1⁄3 of her funds in a publicly-held mutual fund, and trading stocks with some frequency. Her potential remained unnoticed.

Then, in 1980, when 46, and independent of any urgings from her brother, Bertie decided to make her move. Retaining only the mutual fund and Berkshire, she made no new trades during the next 43 years. During that period, she became very rich, even after making large philanthropic gifts (think nine figures).

Millions of American investors could have followed her reasoning which involved only the common sense she had somehow absorbed as a child in Omaha. And, taking no chances, Bertie returns to Omaha every May to be re-energized.”

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