Billionaire Warren Buffett is named one of many world’s best buyers, and the 93-year-old has a religious following of people that admire his monitor report and recognize his sage recommendation on life and investing.
Buffett’s newest annual letter to Berkshire Hathaway shareholders released Saturday morning was crammed with a mixture of each.
On investing in shares:
“I can’t remember a period since March 11, 1942 – the date of my first stock purchase – that I have not had a majority of my net worth in equities, U.S.-based equities. And so far, so good. The Dow Jones Industrial Average fell below 100 on that fateful day in 1942 when I ‘pulled the trigger.’ I was down about $5 by the time school was out. Soon, things turned around and now that index hovers around 38,000. America has been a terrific country for investors. All they have needed to do is sit quietly, listening to no one.”
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On selecting winners:
“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.”
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On market panics:
“Markets can – and can – unpredictably seize up and even vanish as they did for 4 months in 1914 and for just a few days in 2001. For those who imagine that American buyers are actually extra secure than prior to now, suppose again to September 2008. Velocity of communication and the wonders of know-how facilitate immediate worldwide paralysis, and we’ve come a good distance since smoke indicators. Such immediate panics gained’t occur usually – however they’ll occur.
“Berkshire’s ability to immediately respond to market seizures with both huge sums and certainty of performance may offer us an occasional large-scale opportunity. Though the stock market is massively larger than it was in our early years, today’s active participants are neither more emotionally stable nor better taught than when I was in school. For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young. The casino now resides in many homes and daily tempts the occupants.”
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On Berkshire’s prospects, for shareholders like his sister, Bertie:
“Berkshire should do a bit better than the average American corporation and, more important, should also operate with materially less risk of permanent loss of capital. Anything beyond “slightly better,” although, is wishful pondering. This modest aspiration wasn’t the case when Bertie went all-in on Berkshire – however it’s now.”
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On his favourite oil funding:
“At yearend, Berkshire owned 27.8% of Occidental Petroleum’s common shares and also owned warrants that, for more than five years, give us the option to materially increase our ownership at a fixed price. Though we very much like our ownership, as well as the option, Berkshire has no interest in purchasing or managing Occidental. We particularly like its vast oil and gas holdings in the United States, as well as its leadership in carbon-capture initiatives, though the economic feasibility of this technique has yet to be proven. Both of these activities are very much in our country’s interest.”
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On Charlie Munger’s contributions to Berkshire’s success shifting from a textile mill to as we speak’s conglomerate:
“He advised me – accurately! – that I had made a dumb resolution in shopping for management of Berkshire. However, he assured me, since I had already made the transfer, he would inform me find out how to appropriate my mistake. In what I subsequent relate, keep in mind that Charlie and his household didn’t have a dime invested within the small investing partnership that I used to be then managing and whose cash I had used for the Berkshire buy.
“Moreover, neither of us expected that Charlie would ever own a share of Berkshire stock. Nevertheless, Charlie, in 1965, promptly advised me: `Warren, forget about ever buying another company like Berkshire. But now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices. In other words, abandon everything you learned from your hero, Ben Graham. It works but only when practiced at small scale.’ With much back-sliding I subsequently followed his instructions.”
