Published: Sun, February 25, 2018
Finance | By Cynthia Curry

Warren Buffett releases annual letter to shareholders

Warren Buffett releases annual letter to shareholders

Over time, however, Ben Graham's oft-quoted maxim proves true: "'In the short run the market is a voting machine; in the long run, however, it becomes a weighing machine, '" Buffett wrote in his newest annual shareholder letter.

He noted that Berkshire didn't go on a buying "frenzy" and acquire a bunch of companies past year, mostly because there were no desirable options that came at a "sensible" purchase price. Berkshire typically pays all cash for acquisitions. "For that to happen, we will need to make one or more huge acquisitions". The compounded annual return over the last 53 years is 19.1%.

Warren Buffett believes investors should avoid using borrowed money to outperform.

It was also short on faulting excesses of Wall Street and Washington, and said nothing about Berkshire's plan to create a healthcare company with Inc and JPMorgan Chase & Co.

Berkshire said about $29.11bn of its net income was attributable to the reduction of the United States corporate tax rate from 35 per cent to 21 per cent. Book value per share, measuring assets minus liabilities, rose 23 percent in 2017.

It has been more than two years since Berkshire made a major purchase, the $32.1bn takeover of aircraft parts maker Precision Castparts.

The investor shared the data which revealed Berkshire Hathaway's stock declined by a range of 37 percent to 59 percent multiple times over the last five decades.

Business Insider  Andy Kiersz data from Statman and Scheid and Yahoo Finance
Business Insider Andy Kiersz data from Statman and Scheid and Yahoo Finance

Berkshire Hathaway wholly owns dozens of companies - from Dairy Queen to Duracell - and holds significant shares in large and diverse corporations including American Express, Apple, Bank of America, Charter Communications, Coca-Cola, Delta Air Lines, General Motors, Goldman Sachs, Moody's, Wells Fargo and Southwest Airlines.

In the last few years, Buffett, 87, has shed many of his non-Berkshire responsibilities.

Buffett also warned long-term investors including pension funds, college endowments and "savings-minded individuals" that even with US stock prices near record highs, it would be a "terrible mistake" to assume bonds are safer.

Buffett blasted the belief that bonds were a lower risk investment over the long-term.

Their appointments came earlier this year.

Operating profit fell 18 per cent to $14.5bn due to a $2.2bn loss from the group's insurance underwriting unit as a string of natural disasters hit the US.

Insurance float, or premiums collected before claims are paid, which gives Buffett more money to invest, was about $114bn at year end.

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