6 useful snippets from Berkshire's 2023 Annual Letter
This weekend, Berkshire Hathaway published their annual letter. In my humble opinion, it is one of Warren Buffett’s best in recent years, and has countless snippets of investing wisdom.
Reading the entire letter (2023 letter) is encouraged, and apart from his tribute to Charlie Munger, here are the six investing tidbits that appealed most to me. Warren Buffet, more than any other individual, has inspired Tilden Path Capital’s investment philosophy.
1. On short-term movements in the stock market
It is more than silly, however, to make judgments about Berkshire’s investment value based on “earnings” that incorporate the capricious day-by-day and, yes, even year-by-year movements of the stock market. As Ben Graham taught me, “In the short run the market acts as a voting machine; in the long run it becomes a weighing machine.”
2. On market becoming more of a casino recently
Though the stock market is massively larger than it was in our early years, today’s active participants are neither more emotionally stable nor better taught than when I was in school. For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young. The casino now resides in many homes and daily tempts the occupants.
3. On opportunities in stock market
Occasionally, markets and/or the economy will cause stocks and bonds of some large and fundamentally good businesses to be strikingly mispriced. Indeed, markets can – and will – unpredictably seize up or even vanish as they did for four months in 1914 and for a few days in 2001. If you believe that American investors are now more stable than in the past, think back to September 2008. Speed of communication and the wonders of technology facilitate instant worldwide paralysis, and we have come a long way since smoke signals. Such instant panics won’t happen often – but they will happen.
4. On avoiding listening to all of Wall Street
One fact of financial life should never be forgotten. Wall Street – to use the term in its figurative sense – would like its customers to make money, but what truly causes its denizens’ juices to flow is feverish activity. At such times, whatever foolishness can be marketed will be vigorously marketed – not by everyone but always by someone.
5. What to do instead when investing?
We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring. Within capitalism, some businesses will flourish for a very long time while others will prove to be sinkholes. It’s harder than you would think to predict which will be the winners and losers.
One investment rule at Berkshire has not and will not change: Never risk permanent loss of capital. Thanks to the American tailwind and the power of compound interest, the arena in which we operate has been – and will be –rewarding if you make a couple of good decisions during a lifetime and avoid serious mistakes.
6. On having a clear sense of purpose
Berkshire benefits from an unusual constancy and clarity of purpose. While we emphasize treating our employees, communities and suppliers well – who wouldn’t wish to do so? – our allegiance will always be to our country and our shareholders. We never forget that, though your money is comingled with ours, it does not belong to us.
The author, is an investment adviser representative with Tilden Path Capital, LLC, a registered investment adviser in California.
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