Warren Buffett, in his first annual letter to shareholders since the death of his business partner and long-time friend, Charlie Munger, credited his longtime partner for “being the architect” of Berkshire Hathaway.
The renowned investor and CEO tempered expectations by suggesting that exceptional performances may be a thing of the past.
In his letter, Buffett shared a series of investment insights and guidance:
Focus on owning high-quality businesses: Charlie Munger advised Warren Buffett to prioritise owning businesses with strong fundamentals and enduring economic moats rather than focusing solely on buying undervalued stocks. This approach has contributed significantly to Berkshire Hathaway's success.
Practice long-term investing: Munger and Buffett both emphasised the importance of patience and long-term thinking in investing. They advocated for buying and holding onto investments for extended periods, allowing the power of compounding to work in their favour.
Prioritize capital preservation: One of Berkshire Hathaway's fundamental principles is to never risk permanent loss of capital. Munger and Buffett advise investors to prioritise capital preservation over chasing short-term gains, which may involve avoiding speculative investments or volatile market activities.
Be wary of market fluctuations: Munger and Buffett acknowledge the unpredictable nature of financial markets, which can experience significant fluctuations and even crises. They caution against making investment decisions based solely on short-term market movements and advocate for maintaining a steady course despite market volatility.
Stay focused on fundamental values: Despite the temptation of quick profits and market speculation, Munger and Buffett stress the importance of sticking to fundamental values and principles in investing. They advise against getting swayed by market hype or succumbing to unethical practices, highlighting the importance of integrity and moral values in investment decisions.
"Our goal at Berkshire is simple: We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring. Within capitalism, some businesses will flourish for a very long time while others will prove to be sinkholes.
"It’s harder than you would think to predict which will be the winners and losers. And those who tell you they know the answer are usually either self-delusional or snake-oil salesmen.
"At Berkshire, we particularly favor the rare enterprise that can deploy additional capital at high returns in the future. Owning only one of these companies – and simply sitting tight – can deliver wealth almost beyond measure. Even heirs to such a holding can – ugh! – sometimes live a lifetime of leisure.
"We also hope these favored businesses are run by able and trustworthy managers, though that is a more difficult judgment to make, however, and Berkshire has had its share of disappointments." - Buffett
Comments