Recently, the renowned investor and Berkshire Hathaway Chairman, Warren Buffett, shared his annual 2023 letter with the company’s shareholders. Similar to previous years, the letter places less emphasis on ‘news’ and more on providing valuable reminders to investors on successful investment strategies, articulated in Buffett’s distinctive style.
Buffett on investing: “Although the stock market is considerably larger than in our early years, today’s active participants are neither more emotionally stable nor better educated than when I was in school. For whatever reasons, the markets now exhibit much more casino-like behavior than when I was young. The casino now resides in many homes and tempts its occupants daily.”
In this context, Buffett’s new letter reiterates some of the principles that have contributed to Berkshire’s success over time, including:
- Be clear about the purpose of investing.
- Focus on quality investments, or as he would say in his own words, “wonderful businesses”.
- Prefer companies run by good management teams.
- Stay for the long term, as patience pays off.
As part of his investment philosophy, Buffett highlighted the holding of two stocks that Berkshire could maintain indefinitely, namely Coca-Cola and American Express. These examples emphasize the importance of “sticking with a truly wonderful business” and how “patience rewards, and a wonderful business can make up for the many mediocre decisions that are inevitable.”
This year, Buffett emphasized two additional long-term investments that he expects Berkshire to hold indefinitely. The first is Occidental Petroleum (OXY), a key player in oil and gas and a leader in carbon capture initiatives. The second involves holdings in five large Japanese financial conglomerates: Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. He highlighted their good management teams, as well as shareholder-friendly policies, including share buybacks when the price is right, reinvestment of profits to develop their businesses, and reasonable compensation for their executives.
Concerning the succession plan for Warren Buffett, Berkshire supporters have long assumed that Greg Abel, responsible for managing Berkshire’s non-insurance operations, could be the successor. Buffett all but confirmed this notion, noting that Abel “in all respects is ready to be Berkshire’s Chief Executive Officer (CEO) tomorrow.” However, investors may learn more on that topic at Berkshire Hathaway’s annual meeting on May 4th in Omaha.
Finally, on a separate note, Buffett pays tribute to Charlie Munger, who passed away last November, crediting him with guiding Buffett (and subsequently Berkshire) to quality companies. Buffett acknowledges Munger as the “architect” of today’s Berkshire.
Main investments within the Berkshire Hathaway portfolio
Source: CNBC with Berkshire Hathaway data
* Holdings are as of December 31st, 2023, as reported in Berkshire Hathaway’s 13F filing on February 14th, 2024, except for: Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo, which are as of June 12, 2023. Also, Occidental Petroleum, which is as of February 5, 2024. At December 31 Berkshire held a cash and cash equivalents position of US$168bn.
Note: The companies cited in the image do not necessarily constitute an active Axxets/Activest recommendation and are for informational purposes only.