As a college professor, I assign reading and a paper on the legendary Berkshire Hathaway’s CEO and Chairman Warren Buffett’s latest Letter to Shareholders to my finance students.
Buffett writes his own shareholder letters. I have read the letters annually for years and find them fun, enlightening and educational. The letters contain his gems on the economy, financial markets, and money management.
1. Berkshire’s Long Term Performance Exceeds S&P 500
Buying Berkshire Hathaway shares is the best way to own a piece of his success. Consider the shares’ long term performance against the S&P 500, a market proxy.
Buffett was referring to the purchasing frenzy in 2017. That fueled a lot of higher priced acquisitions in the market, resulting in Berkshire Hathaway buying fewer stand-alone businesses.
Buffett has always exercised patience and will pass on a proposed acquisition if it doesn’t make sense for the company. They don’t believe in overpaying for acquisitions.
Buffett and Munger view these stakes as interests in diversified businesses. They bought fifteen positions for Berkshire Hathaway’s portfolio which they intend to hold long term.
Just like Buffett’s motto about borrowing for acquisitions, use debt sparingly for your purchases. Pay cash when possible rather than putting on your credit card.