Warren Buffett's 2018 Annual Letter: Berkshire Hathaway ~ market folly

Monday, February 25, 2019

Warren Buffett's 2018 Annual Letter: Berkshire Hathaway

Warren Buffett has released his 2018 annual letter in Berkshire Hathaway's annual report.  In it, he notes they bought $43 billion of marketable equities last year and sold $19 billion.  Berkshire now has a cash-equivalents hoard of $112 billion and another $20 billion in fixed income.

Here's some select quotes from the letter with the full text below:

On share buybacks:  "All of our major holdings enjoy excellent economics, and most use a portion of their retained earnings to repurchase their shares. We very much like that: If Charlie and I think an investee’s stock is underpriced, we rejoice when management employs some of its earnings to increase Berkshire’s ownership percentage."

On Berkshire buying back its own shares:  "it is likely that – over time – Berkshire will be a significant repurchaser of its shares, transactions that will take place at prices above book value but below our estimate of intrinsic value. The math of such purchases is simple: Each transaction makes per-share intrinsic value go up, while per-share book value goes down. That combination causes the book-value scorecard to become increasingly out of touch with economic reality."

On holding cash:  "Berkshire will forever remain a financial fortress. In managing, I will make expensive mistakes of commission and will also miss many opportunities, some of which should have been obvious to me. At times, our stock will tumble as investors flee from equities. But I will never risk getting caught short of cash."

On finding private acquisitions: "Prices are sky-high for businesses possessing decent long-term prospects.That disappointing reality means that 2019 will likely see us again expanding our holdings of marketable equities.  My expectation of more stock purchases is not a market call. Charlie and I have no idea as to how stocks will behave next week or next year."

Embedded below is Warren Buffett's annual letter:

You can download a .pdf copy here.

For more from the Oracle of Omaha, be sure to check out Warren Buffett's recommended reading list.

We've also posted up other recent investor letters:

- Excerpts from Baupost Group's letter

- Third Point's Q4 letter 

- Sequoia Fund's letter

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