Warren Buffett's annual letter to shareholders was announced, which is known as the "investment bible" by global investors. As value investors, we are all looking forward to it, hoping to understand the concept of Buffit's value investment and learn Buffit's views on value investment through Buffett's letter to shareholders every year, so as to be inspired. On February 24, Warren Buffett's Berkshire Hathaway announced its 2023 financial report with a "Letter from Warren Buffett to Shareholders". According to the financial report, Berkshire Hathaway's net profit in the fourth quarter of 2023 was 375$7.4 billion, with a net profit of 962 for the full year of 2023$2.3 billion, with a net loss of $22.7 billion in 2022$5.9 billion. In 2023, Berkshire Hathaway achieved 15The 8% annual return did not outperform the S&P 500, but it still achieved stable growth.
In this year's letter to shareholders, Warren Buffett began with Munger, as Buffett's closest partner, Munger died on November 28 last year, only 33 days before his 100th birthday. Munger was called Berkshire Hathaway's architect by Buffett, while Buffett modestly said that I was just a general contractor, and at the time of Charlie's death, Buffett highly affirmed Charlie Munger's wisdom and contribution to Berkshire Hathaway, saying that without Charlie, Berkshire Hathaway would not be as successful as it is now. At a new beginning, Buffett looks back on his past with Munger, from acquaintance to intimate collaboration. Although Buffett, like Munger, was born in Omaha, they didn't know each other in the early days. Munger spent 80 percent of his life living elsewhere in the United States, and it wasn't until 1959, when Munger was 35 years old, that Buffett met him for the first time. In 1962, Munger decided to pursue a career in money management.
Munger's influence on Buffett was mainly to change Buffett's previous investment philosophy, and Buffett followed his teacher Graham to do value investing. In the early days, I like to buy some cheap ordinary companies, that is, buy some ** companies that are seriously undervalued. But Charlie says that if you only buy these mediocre companies, you're going to have a hard time achieving great things in the long run, and you're going to buy good businesses with a reasonable **, in other words, throwing away everything you've learned from Graham. Later, Buffett listened to Munger's words, and since then he has created an investment miracle. For a long time, Warren Buffett has basically held great companies, and then grew with great companies. This is much smarter than cheap *** mediocre companies. So later Buffett figuratively said that since I met Munger, I really changed from an ape to a man.
So Warren Buffett made a very interesting analogy in his letter: he said that in the real world, great buildings are associated with their architects, and those who poured concrete or installed windows were quickly forgotten. Berkshire has become a great company, I have been in charge of the construction team for a long time, and Charlie should always be considered an architect, and he highly appreciates Munger's tremendous contribution to Berkshire's development.
From the financial report, we can also see that Berkshire Hathaway's current position has not changed much. At the end of 2023, Berkshire Hathaway's top 10 heavy stocks are Apple, Bank of America, American Express, Coca-Cola, Chevron, Occidental Petroleum, Kraft Heinz, Moody's, Davita Sword, and Citigroup. Among them, the first heavy stock is Apple, accounting for 50% of the **, it can be seen that Buffett has a soft spot for Apple, Apple is also the company that brings the most profits to Buffett, because Apple is the world's largest company in terms of market capitalization, so Buffett dares to take a heavy position, although Apple's absolute increase is not very large, but because of the heavy position, it has contributed hundreds of billions of dollars in profits to Buffett.
In the letter, Buffett mentions that Berkshire Hathaway has more than three million dollars, and that I am responsible for writing a letter each year, which will be useful to this diverse and ever-changing group of shareholders, many of whom want to learn more about their investments. Therefore, Buffett's letter to shareholders is an explanation to the majority of shareholders, and it also writes Buffett's investment experience in the past year. Warren Buffett said in the letter that judging the value of Berkshire's investments based on returns, considering that these returns contain unpredictable day and night, and even year after year, this approach is far from rational, as Graham taught me, in the short term the market behaves like a voting machine, and in the long run, it will become a weighing machine. He advises investors to consider the value of a company's investment from a long-term perspective. Buffett said in the letter that our goal at Berkshire Hathaway is simple, we want to have businesses that enjoy good basic and lasting economic benefits, either all or some of the shares, some of which will thrive in the long term, while others will prove to be bottomless, and it is much more difficult than you think to know which companies will be winners and which ones will be losers, and those who claim that they know the answer are usually either self-deception or charlatans. At Berkshire Hathaway, we particularly favor rare companies that can invest additional capital in the future at a high rate of return, and owning a company like this, and then sitting quietly, can create almost immeasurable wealth. Even the heirs of such holders can live a life of leisure. We also want these favored businesses to have competent and trustworthy managers to operate, although this is a more difficult judgment to make. Therefore, Buffett once again emphasized in the letter that the true meaning of value investing is to grow with great companies, rather than chasing ups and downs and trying to make money in the market.
Because when investing, it is difficult for you to experience short-term fluctuations and change the macro environment. Munger once said that the so-called macro means that the environment you are in cannot be changed, but you can try to discover some great companies at the micro level. This is also particularly meaningful for us, we should not complain about the macro environment, but choose good companies that can go through the economic cycle, through the bull and bear, under the given conditions. In the letter, Buffett said that Berkshire Hathaway's net worth is the highest among U.S. companies, reaching $561 billion at the end of last year, while the net worth of the other 499 S&P 500 companies in 2022 was 89 trillion US dollars, according to this measure, Berkshire Hathaway currently occupies nearly 6% of the share, which shows that Berkshire Hathaway's assets are already very large, so it is impossible to double in the next five years. However, Berkshire Hathaway's return on investment is very stable, with Berkshire Hathaway's annualized return approaching 20% over the past 60 years, and the cumulative return has reached about 430,000 times, it can be said that it has created an unprecedented investment performance. Berkshire Hathaway has been relatively firm in holding on to some cash, holding a record $160 billion or more in this earnings report. This shows that in the current stock price in the United States has reached a record high, Buffett has maintained a large amount of cash, and in the fourth quarter, it also slightly increased Apple's, it is also more focused on risk control, holding a large amount of cash, so that it can be comfortable when the market is at risk. In the letter, Buffett highlighted the two companies he has been holding for a long time, American progesterone and Coca-Cola, which have a long history and pay a large amount of dividends every year, and then mentioned that Occidental Petroleum has increased its holdings in the past two years, which are all companies that have brought stable dividends to Berkshire Hathaway.
Later, Buffett mentioned five Japanese companies that he has invested in recent years, and Berkshire Hathaway continues to hold these five companies, holding about 9% of each company, and these five companies are also large companies with relatively stable profits. Warren Buffett's investment in Japan in the past two years has also achieved a relatively good return, almost doubling the income. And Japan** hit a new high in nearly 30 years last year. It also once again shows that Buffett has unique advantages in stock selection and timing. Warren Buffett's value investing philosophy has always been consistent: by choosing good industries, good companies, and then patiently holding them for ten years or even longer, so as to obtain good returns. In fact, there is also no shortage of great companies with a cumulative increase of hundreds of times in the A** field, and there is no shortage of investors who have achieved tens of thousands of times growth through long-term value investment. However, there are very few people who can insist on value investment in A-shares, which is also related to the characteristics of the A** market itself. Value investment in the A** field should be combined with the actual situation of the A** field, so as to be able to select good companies that can grow in China for a long time.
At present, the A** field is still in the position of the historical bottom, and under the promotion of the national team's increased rescue efforts and other ** funds, the A** field has recently walked out of a wave of continuous trend, out of 8 consecutive yang, and market confidence has been boosted. In the Year of the Dragon, these wrongly killed high-quality leading stocks may usher in an opportunity for valuation repair, which will be the main investment line throughout the year. Now many high-quality leading stocks are only three or four folds of the high point, and at this time, it is a good opportunity to obtain excess returns in the long run.
At the end of the letter, Buffett said that Buffett's shareholders' meeting will be held on May 4 this year, but this year because Munger has passed away, so he can not see him again, which is a great pity, but he will see Buffett and two ** managers including Greg Abel and Ajit Jain on the stage to answer shareholders' questions. Greg is responsible for all of Berkshire's non-insurance businesses, and he's ready to become Berkshire's CEO tomorrow by all accounts. Whereas, Ajit is mainly responsible for the insurance business. In the past eight years, I have been to Omaha five times to attend Warren Buffett's shareholders' meeting, and I will go to the United States again to attend Buffett's shareholders' meeting during May Day this year, and listen to the insights of Warren Buffett and Munger with some entrepreneurs. After attending the Warren Buffett shareholders' meeting, I also plan to visit several international financial institutions on Wall Street in New York to understand their views on China's economy and the latest operation of Wall Street financial institutions. Once again, we mourn the memory of the wise old man Charlie Munger, who may have left us, but Munger's thoughts remain forever. (The views are for reference, investment needs to be cautious, source: Internet).