market folly

Berkshire Hathaway's Warren Buffett has released his 2016 annual letter.  In it, he touches on Berkshire's performance and doles out some investing insight.  Here's some quick takeaways:

- Best book Buffett read in 2016: Phil Knight's Shoe Dog about the founding of Nike. (You can view the rest of Buffett's recommended reads here.)

- Blasted professional money managers / active management about the fees they charge.  Said people should stick with low-cost index funds.

- Update on his bet of which will outperform: the S&P 500 versus a pool of 5 fund of hedge funds over the course of 10 years.  The S&P is trouncing with a 85.4% total return thus far, while the very best of the FoF's has returned 62.8% while others have only returned in the single digits.

- Later Buffett writes: "Finally, there are three connected realities that cause investing success to breed failure. First, a good record quickly attracts a torrent of money. Second, huge sums invariably act as an anchor on investment performance: What is easy with millions, struggles with billions (sob!). Third, most managers will nevertheless seek new money because of their personal equation – namely, the more funds they have under management, the more their fees."

- Berkshire's portfolio managers Todd Combs and Ted Weschler are now managing over $10 billion each.

Embedded below is Warren Buffett's 2016 annual letter:



You can download a .pdf copy here.

Be sure to also check out Charlie Munger's annual meeting too.

For more recent letters from top investors, check out Third Point's Q4 letter, as well as Greenlight Capital's Q4 letter, and finally the latest memo from Oaktree Capital's Howard Marks.