Warren Buffett, on Saturday, sought to reassure investors about the long-term prospects of his conglomerate Berkshire Hathaway (BRKa.N), while also mourning the recent loss of his long-serving deputy, Charlie Munger.
In his widely-read annual letter to Berkshire shareholders, Buffett emphasised the resilience of his over $900 billion conglomerate, suggesting it could weather even unprecedented financial storms.
“Berkshire is built to last,” Buffett affirmed.
However, he tempered expectations regarding Berkshire’s stock performance, acknowledging that while the company should outperform the average American corporation, its substantial size precludes the possibility of extraordinary growth.
“There remain only a handful of companies in this country capable of truly moving the needle at Berkshire,” Buffett noted.
Accompanying the letter were Berkshire’s financial results for 2023, boasting a record $37.4 billion operating profit and $96.2 billion net profit.
Berkshire’s shares have surged by an astonishing 4,384,748% since Buffett assumed control in 1965, significantly outpacing the Standard & Poor’s 500.
Buffett expressed confidence in Vice Chairman Greg Abel as his designated successor, but reserved his most heartfelt words for Munger, whom he hailed as the “architect” of Berkshire.
He credited Munger with shaping his investment philosophy and lauded his influence on Berkshire’s conservative fiscal approach.
Analysts like Jim Shanahan of Edward Jones underscored Munger’s pivotal role in Buffett’s success, highlighting their symbiotic relationship.
Meanwhile, Cathy Seifert of CFRA Research praised Buffett’s emphasis on Berkshire’s stability and succession planning.
Buffett likened Berkshire’s cautious approach to an insurance policy against rash decisions, particularly in today’s market climate of inflated valuations.
Thomas Russo, a long-term shareholder, commended Buffett’s foresight in capital allocation.
The letter also detailed Berkshire’s fourth-quarter operating profit, showing a 28% increase, driven by gains in insurance, railroad, industrial, energy, and retail sectors.
Despite challenges such as wildfire losses and workforce reductions, Berkshire’s diversified assets remained robust.
Buffett’s cautionary stance extended to Berkshire’s investment strategy, with the conglomerate selling more stocks than it bought in 2023.
This prudence reflects Buffett’s concern over market excesses, as articulated by Bill Smead of Smead Capital Management.
Notably, Buffett signalled Berkshire’s intention to maintain its stakes in companies like Apple, American Express, Bank of America, and Coca-Cola indefinitely.
The absence of Munger at Berkshire’s upcoming annual meeting marks a significant shift, highlighting the evolving leadership landscape.
In summary, Buffett’s letter underscores Berkshire’s enduring strength and strategic vision, while paying homage to Munger’s invaluable contributions to its success.