Legendary Investor Warren Buffett's Annual Letter to Berkshire Shareholders Is Always a Good Read

Each year Warren Buffett writes a lengthy, informative and entertaining letter to Berkshire Hathaway shareholders in the company's annual report.

For individual investors it's always interesting and filled with valuable and time tested experience based lessons.

This year's espistle is no exception.

Warren Buffett's Annual Berkshire Letter: The Highlights summarizes the letter's most valuable insights:

 

"Warren Buffett‘s annual letter is known for his folksy witticism and over-the-top compliments. . . . highlights from the letter.

Buffett also made a series of warnings to those CEOs who didn’t do much because of “uncertainty” in the economic environment.

Uncertainty? Rubbish: “There was a lot of hand-wringing last year among CEOs who cried ‘uncertainty’ when faced with capital allocation decisions (despite many of their businesses having enjoyed record levels of both earnings and cash). At Berkshire, we didn’t share their fears, instead spending a record $9.8 billion on plant and equipment in 2012, about 88% of it in the United States.

That’s 19% more than we spent in 2011, our previous high. Charlie and I love investing large sums in worthwhile projects, whatever the pundits are saying. We instead heed the words from Gary Allan’s new country song, ‘Every Storm Runs Out of Rain.’”

Always be bullish on America: ”We will keep our foot to the floor and will almost certainly set still another record for capital expenditures in 2013. Opportunities abound in America.”

A history lesson: ”A thought for my fellow CEOs: Of course, the immediate future is uncertain; America has faced the unknown since 1776. It’s just that sometimes people focus on the myriad of uncertainties that always exist while at other times they ignore them (usually because the recent past has been uneventful).”

Don’t risk missing out: “Since the basic game is so favorable, Charlie and I believe it’s a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of “experts,” or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it.”

Call me, maybe: ”If you are a CEO who has some large, profitable project you are shelving because of short-term worries, call Berkshire. Let us unburden you.”

Summing Up

In the letter, Buffett also comments favorably on his long term investments in the shares of companies such as Wells Fargo and IBM.

In addition, his views on long term investing in solid companies and various other investment related topics are well worth taking the time to read.

In that regard, you may wish to click on "from the letter" hereinabove and spend some time becoming more familiar with how Buffett thinks about things, and especially why investing in wonderful companies at a fair price is always preferable to investing in fair companies at a wonderful price.

Here's a sample: "American business will do fine over time. And stocks will do well just as certainly, since their fate is tied to business performance. Periodic setbacks will occur, yes, but investors and managers are in a game that is heavily stacked in their favor. (The Dow Jones Industrials advanced from 66 to 11,497 in the 20th century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression and many recessions. And don't forget that shareholders received substantial dividends throughout the century as well.) . . .

On an inflation adjusted basis, GDP per capita more than quadrupled between 1941 and 2012. Throughout that period, every tomorrow has been uncertain. America's destiny, however, has always been clear: ever-increasing abundance."

I share his long term optimism about our great country, our great people and our many great businesses.

Now we just need to get our political act of self governing together.

Thanks. Bob.