OMAHA, Neb. — Renowned investor Warren Buffett, known for his exceptional track record, always garners attention with his annual letters to Berkshire Hathaway shareholders, as they are rich in investment wisdom and insights from his extensive experience. His latest letter, released on Saturday, touches on various topics related to investing and financial stewardship while maintaining a neutral stance on political or current event matters, ensuring he doesn’t alienate his diverse portfolio companies, including Geico, Dairy Queen, and Helzberg Jewelry.
One significant point Buffett made pertains to government actions. He expressed gratitude to the U.S. government and emphasized the importance of wise financial management. “Thank you, Uncle Sam,” he stated, hoping future payments from Berkshire would be even greater than in 2024. He urged the government to take care of those who struggle through no fault of their own and to ensure a stable currency, which he believes requires both wisdom and vigilance.
Buffett also reflected on the future of Berkshire’s well-regarded annual reports, hinting at a transition in leadership. At 94 years old, he acknowledged that Greg Abel will soon take over as CEO and that he upholds the same principles regarding transparency and honesty in reporting to shareholders. He stressed the importance of sincerity in communications to prevent self-deception among executives.
Addressing the inevitability of mistakes, Buffett acknowledged that while he expects to misjudge business acquisitions and the qualities of potential partners, he has also experienced unexpected successes. He highlighted that a single outstanding decision can significantly influence long-term outcomes, citing the acquisition of GEICO and his partnership with Charlie Munger as examples. “Mistakes fade away; winners can forever blossom,” he concluded.
Buffett articulated his reliance on American enterprises and the equity market for financial growth. He noted that businesses and individuals with valuable skills usually adapt well during times of economic instability, whereas he has depended on equities, particularly the success of American companies throughout his life.
Regarding investment strategies, Buffett acknowledged that while complete ownership of outstanding businesses is rare, fractional shares are often available at enticing prices. He noted Berkshire’s flexible investment strategy, whether in acquiring entire companies or purchasing stocks, depending on where capital can be effectively deployed. He revealed that opportunities may not always be prevalent, yet Greg Abel has showcased his ability to capitalize on favorable conditions when they arise.
Reflecting on America’s remarkable development over its 235 years, Buffett remarked on the unforeseen progress since the Constitution was adopted. He pointed out that while the country has occasionally borrowed from abroad, domestic savings and wise capital deployment were crucial for growth. He stated that America’s history was not without challenges from wrongdoers who exploited trust but affirmed that the collective savings of Americans have yielded productivity beyond the dreams of early settlers.
Buffett also addressed concerns regarding Berkshire’s substantial cash reserves, which currently stand at $334.2 billion. He reassured shareholders that most of their investments remain in equities and this preference will persist. The value of marketable equities dipped, but non-quoted controlled equities have risen and still surpass marketable portfolio value. He maintained that substantial portions of shareholder funds would continue to be invested in equities, primarily American, which frequently have significant international operations.
Finally, Buffett cautioned against the risks associated with cash holdings, noting that paper money can depreciate in value due to poor fiscal policies, citing instances in other countries. He warned that fixed-coupon bonds offer no safeguard against rampant inflation and highlighted his enduring commitment to prioritize ownership stakes in businesses rather than cash-equivalent assets.
