Every year, Warren Buffett will publish a separate annual letter to go onto of the annual report of Berkshire Hathaway (BRKA, BRKB). Considering his vast amount of knowledge, wisdom, and discernment, every part of the letter I’m sure was intentionally thought out to be placed in the letter to begin with. In fact, it was so good that I ended up re-reading it 3 times and re-reading the notes I took of the letter 2 more times on top. I’ve now decided to publish the top parts of the letter that stood out to me.
-Charlie offered free advice even when he couldn’t benefit from it. Charlie said: Warren, forget about 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”
-Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades. In a way his relationship with me was part older brother, part loving father. Even when he knew he was right, he gave me the reins, and when I blundered, he never- never- reminded me of my mistake.
-Bertie instinctively knowing that pundits should always be ignored
-understand the power of incentives
-know who is “selling” and who can be trusted
-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
-at Berkshire, we particularly favor the rare enterprise that can deploy additional capital at high returns in the future. Owning only one of these companies and simply sitting tight can deliver wealth almost beyond measure
-never deal with a rascal under the expectation that you can prevent him from cheating you.
-People are not that easy to read. Sincerity and empathy can easily be faked. That is as true now as it was in 1863.
-some companies we can value, some we can’t. And if we can, they have to be attractively priced.
-outside the US, there are essentially no candidates that are meaningful options for capital deployment at Berkshire.
-and we now have a small cadre of long-time managers who never muse about going elsewhere and who regard 65 as just another birthday.
-though the stock market is massively larger than it was in our early years, today’s active partipants 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.
-at such times, whatever foolishness can be marketed will be vigorously marketed-not by everyone but always by someone.
-Money, he learns, has trumped morality
-never risk permanent loss of capital
-Berkshire is not big on newcomers
-the lessons 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.
-BNSF is the largest of the rail systems in North America. They must spend annually more than its depreciation to maintain its present level of business. This is bad for owners; capital intensive industries. A century from now, BNSF will continue to be a major asset of the country and of Berkshire
-when the dust settles, America’s power needs and the consequent capital expenditure will be staggering
-Bertie tried trading herself for 20 years, then at 46, bought Berkshire and made no new trades for the next 43 years, and she became very rich.
-the more than prudent large cash pile will be held ready for disasters, which will happen
Disclaimer
This is not Financial Advice. This article is meant only for educational and perhaps entertainment purposes.