Berkshire Hathaway 2013 Annual Shareholder Letter published
March 2, 2014, 3:25 pm
Berkshire Hathaway's annual shareholder meeting, above, is often called 'Woodstock for Capitalists.' Warren Buffett has published his 2013 Annual Shareholders Letter.
Berkshire Hathaway's Annual Shareholder Letter
Since 1965, Warren Buffett has each year penned Berkshire Hathaway's annual shareholder letter. Published in preparation for the annual shareholder's meeting, held in early May in Omaha, the letter doubles as a literary platform upon which Warren Buffett expounds upon recent successes, follies and his overall investment philosophy.
Published just this weekend, this year's annual letter evaluates the company's ups and downs of last year, including its performance relative to the overall stock market, and offers lots of free investing wisdom as well.
Berkshire Hathaway's 2013 performance
In this year's letter, Buffett explains that while Berkshire returned 18% on assets this year, which is normally a great return, the company actually underperformed the S&P 500 index by 14%. This is because the S&P 500 made exceptional returns of 32.4%. As Buffett explains, his investments are intended to make steady and decent returns each year, so when the stock market soars, his investments will lag. But when the stock market is weak or bad, Berkshire will shine.
The takeaway is, Buffett suggests we're in the stage of the stock market cycle where the market is highest. The implication, of course, is the market may not be able to stay this high indefinitely.
Warren Buffett's investment philosophy
In the letter, above, Warren Buffet breaks down his investment philosophy into a handful of salient points. These components of how Warren Buffett invests are the subject of the lesson that explores Buffett's investment approach:
Here is summary of some of the many pearls of wisdom Warren Buffett shares in the letter above:
- What's important is the durability of the business in question, particularly its earnings. For example, will this business still be in operation 50 years from now, and will its earnings be growing?
- View investing as taking ownership in a business. This approach makes one employ a common-sense perspective when evaluating an investment opportunity. Always stick to what you know.
- Moreover, stock prices are a derivative of reality. The business itself is reality. Therefore, always focus on the business, not its stock price. As Buffett says, when he and his investment team discuss opportunities, the question of present trading prices do not arise.
- And when the crowd of stock market participants and observers is fearful and gloomy, an investor should be optimistic and greedy, investing liberally in great companies. Buffett says the trend of American growth and prosperity is still a strong one, and therefore is a safe bet.
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