This past Saturday blessed us yet again with a new edition of the annual Berkshire Hathaway Letter to Investors – signed, sealed, and delivered by the Oracle himself. After taking some time to chew it over, I want to highlight a few of the points raised in the report. The highlights below don’t even begin to cover the value within its 17 pages, they are just a few I really took a liking too.
If you haven’t yet read the letter, you can find it HERE. Regardless of whether you’re an investor or not, Warren Buffett has a real ability to jot his wisdom down on paper. Infused with life lessons, insights & quotes, and anecdotes about the future, the Shareholders Report is something you can’t pass up the opportunity to read – who knows how many more of these we will get.
1. Wind at our Backs
As always, Warren makes clear the benefits of choosing to invest in stocks over bonds, and encourages anyone who is interested, but not necessarily confident, to at least take advantage of the plethora of ETF’s in front of us. Coming off the victory of his 10-year wager (which he makes sure to mention), Buffett really drills home the idea that success in the markets is possible for anyone willing to be patient and level-headed. The emphasis is put on the value of remaining calm during the market storms that will inevitably face us, even going so far as giving examples of Berkshire’s own struggles (and why he is not a huge a fan of leverage). Buffett then makes clear again the purpose of Berkshire’s investments – buying a portion of a company that you are expecting to succeed in the long term, not just some ticker scrolling across the screen or a series of technical charts (so so so important to remember).
If there is anything I can encourage you to do, it would be to read pages 10-13 of the report. The insight regarding the shifting mentality of market participants – and how valuable it is to heed warnings and stay distanced from the pack – make the time spent on them well worth it.
2. Berkshire Directors
By now it’s become a market expectation that either Greg Abel and Ajit Jain will take the throne when Buffett decides to call it a career, however, the shoutout on page 17 of the report somewhat solidifies that expectation for me. The two great businessmen, Greg Abel being a Canadian boy I must add, will be very respectable successors, and for anyone looking to invest in Berkshire for the long term – you can expect the firm to be in good hands. Obviously, the way it’s looking, Berkshire will be run by Buffett for the rest of eternity – in reality, however, there will come a day when someone new takes the reigns, and I believe the half-a-paragraph blip at the very bottom of the report gives readers a good sense of who that may be.
3. Insurance Woes
Although not an area I’m particularly educated in, Warren does a great job of illustrating the struggles their insurance division dealt with during a year full of disaster after disaster. Highlighting the way in which the firm values risk, and therefore understands how exposed they are at all times, really opened up my eyes to the industry and the ability to hedge against full exposure. I’m not going to dive too deep into this topic, it’s one I found to be incredibly interesting but also one I think you should read from Warren’s keyboard directly.
Like them, or don’t, you can’t deny the brilliance that is the dynamic duo of Warren Buffett and Charlie Munger. If you find some extra time on your hands, do yourself a favour and read the 2017 letter – maybe even dive back into the 2016 and 2015 editions to get a deeper understanding of how views have shifted over recent years.