Warren Buffett, in his recent annual letter to Berkshire Hathaway shareholders, emphasized Charlie Munger’s pivotal role in shaping the conglomerate and cautioned against heeding frequent trading advice from Wall Street. He highlighted his approach to communicating with long-term investors like his sister, Bertie, who disregards market pundits’ predictions. Buffett reassured investors that Berkshire remains a secure investment, albeit with less spectacular returns expected due to a lack of attractively priced acquisitions. However, he pledged readiness to deploy the company’s significant cash reserves during market downturns.
Buffett credited Munger as the “architect” of Berkshire and praised his foresight in acquiring quality businesses at fair prices. Despite Munger’s passing, Buffett acknowledged his significant influence and the challenge of Berkshire’s future leadership transition without him. He affirmed Berkshire’s succession plan, with Greg Abel slated to succeed him as CEO, while emphasizing Abel’s readiness for the role.
Regarding Berkshire’s performance, Buffett noted the resilience of its insurance businesses but acknowledged underwhelming results from utilities and the BNSF railroad. He reiterated long-term investment commitments while cautioning against overemphasizing quarterly earnings influenced by investment valuations.
Berkshire’s fourth-quarter profit surged, driven by its diverse businesses and investment gains. Buffett urged focus on operating earnings, which surpassed analysts’ expectations. Berkshire’s stock reached new highs, reflecting investor anticipation of Buffett’s letter.
Despite Berkshire’s share repurchases and recent acquisitions, including the full acquisition of Pilot truck stops, Buffett warned of challenges in identifying suitable investments. He indirectly referenced legal disputes surrounding the Pilot acquisition, emphasizing the importance of integrity in business dealings.
In summary, Buffett’s letter underscored Munger’s legacy, Berkshire’s long-term investment approach, and the company’s preparedness for leadership succession. It also highlighted ongoing challenges in deploying excess cash and maintaining ethical business practices.
