Published: Sun, February 25, 2018
Markets | By Noel Gibbs

Warren Buffett's annual letter: Berkshire got a $29 billion gift

Warren Buffett's annual letter: Berkshire got a $29 billion gift

But he said the prices asked for businesses a year ago "hit an all-time high", and Berkshire will be looking for those available at "a sensible purchase price".

Buffett's letter is always well-read in the business world because of his remarkable track record over more than five decades and his talent for explaining complicated subjects in plain language. Unlike many tech conglomerates, which had parked their cash overseas, Berkshire Hathaway's cash was in America.

Both are considered candidates to eventually replace Buffett, 87, as Berkshire's chief executive.

That's one of the finest gems from billionaire investor Warren Buffet's annual letter to Berkshire shareholders, which was released on Saturday.

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"(P) rices for decent, but far from spectacular, businesses hit an all-time high" previous year, he wrote.

A major reason for that decline was a $2.22bn loss from insurance underwriting, Berkshire's first full-year deficit since 2002, hurt by hurricanes Harvey, Irma and Maria and wildfires in California. "I was expecting more", Fox said. Still, the Omaha, Nebraska-based company likely only lost less than 1% of its net worth, Buffett noted. Jain will be responsible for insurance operations, while Abel will oversee the rest of Hathaway's sprawling businesses.

Warren Buffett is 87 years old and has not named a successor yet. But the biggest contributor to the $29 billion windfall, by far, was Berkshire's huge unrealized gains on stocks (a net figure of more than $100 billion at yearend) and a tax item that goes with them.

In his much-awaited letter, always full of wisdoms and ideas on investment, the Oracle of Omaha warned that in any upcoming day, week or even year, stocks will be riskier - far riskier - than short-term United States bonds, warns Warren Buffett, the Oracle of Omaha. The S&P 500 index fund Buffett backed generated an 8.5 percent average annual gain and easily outpaced the hedge funds.

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Proceed to Buffett's appraisal of what happened. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals.

Buffett said it is a "terrible mistake" for investors with long-term horizons - among them, pension funds, college and endowments and savings-minded individuals - to measure their investment "risk" by their portfolio's ratio of bonds to stocks. At times, bonds are riskier than stocks.

Turning to investments, Berkshire's Apple holding was up to $28.2B at year-end, second only to Wells Fargo at $29.3B.

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