Here's The Latest Advice From Warren Buffett
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Equity investments
The Oracle of Omaha has spoken. In his latest shareholder letter published over the weekend, Warren Buffett discussed his outlook for stocks and what it takes to own a good business, along with other tips and investment strategies. Here are some of the takeaways as Berkshire Hathaway (BRK.A) (BRK.B) reported operating earnings of nearly $50B in 2024:
How he views equities: Berkshire’s equity activity “is ambidextrous.” One hand maintains near or total control of its 189 subsidiaries, including GEICO, property-casualty insurance, and railroad and utility operations. In the other hand is a “small percentage of a dozen or so very large and highly profitable businesses” that are standalone stocks. While many investors increasingly focus on the second hand, whose transactions have recently led to a swelling cash pile, Buffett says that is not the way to look at it.
Quote: “Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities. That preference won’t change. While our ownership in ‘marketable equities’ moved downward last year from $354B to $272B, the value of our ‘non-quoted controlled equities’ increased somewhat and remains far greater than the value of the marketable portfolio.”
Good businesses over cash-equivalent assets: “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned. Paper money can see its value evaporate if fiscal folly prevails. In some countries, this reckless practice has become habitual, and, in our country’s short history, the U.S. has come close to the edge. Fixed-coupon bonds provide no protection against runaway currency.”
Wait for the right time: “We are impartial in our choice of equity vehicles, investing in either variety based upon where we can best deploy savings. Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities. Greg [Abel] has vividly shown his ability to act at such times as did Charlie [Munger].”
U.S. exceptionalism: “Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities – mostly American equities although many of these will have international operations of significance.” See Buffett’s top U.S. stock holdings
Some outliers: Buffett likes Japan. He touted his five stakes in enterprises like ITOCHU, Marubeni, Mitsubishi, Mitsui and Sumitomo, which “operate in a manner somewhat similar to Berkshire itself.” It’s a “small but important exception to our U.S.-based focus” due to the companies’ “financial records, managements, and attitude in respect to their investors.” Capital deployment is key here, as well as appropriate dividends and repurchases, and “far less aggressive compensation programs than their U.S. counterparts.” Buffett also substantially increased his holdings of Treasury bills in 2024, given improving yields on the highly liquid short-term securities. Take the WSB survey.