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March 10, 2023 | Warren Buffett Speaks and Smart People Listen

Hilliard MacBeth

Author of "When the Bubble Bursts: Surviving the Canadian Real Estate Crash"

The world’s most successful long-term investor, Warren Buffett, writes an annual letter to shareholders about investing and the recent performance of his investment vehicle, Berkshire Hathaway.

This year’s letter came out last weekend, and like always, the short piece contains interesting ideas, comments and tips on investing.

Why not take advantage of his wisdom, at no charge?

Buffett is one investment manager who holds the position of top all-time investor, without any challenger in sight.

Warren Buffett continues to write an annual letter, at age 92. He has been investing for 80 years and his track record is accessible online to anyone. His previous annual letters are posted and make great reading.

Investors can participate in his success by buying a share of Berkshire Hathaway (BRK-B), of which Buffett is the largest shareholder. The original shares, BRK-A, trade at $461,912 each, so it’s easier to buy the B version. Although Elon Musk is the wealthiest, Buffett would have that title if he had not donated many of his shares to a charitable foundation.

The letter appears in February with an annual summary and reflections on past decades. Here is a link.

This year, Buffett highlighted two purchases from three decades ago, Coca Cola and American Express. His positions in those companies cost about $1.3 billion each and are worth $25 billion and $22 billion respectively. Buffett admits that part of his success is that he started investing early and lived a long life.

Berkshire Hathaway reported large losses of about $22 billion for 2022, but only if unrealized gains and losses are included. Buffett prefers operating earnings, where the results were better, showing earnings of about $31 billion, a new record.

The difference is due to accounting rules that were introduced in 2018 that require companies to report gains and losses on all positions held as part of annual earnings. For most companies this is not important, but Berkshire holds very large investment positions.

The mark-to-market method also mirrors how individual investors review their returns. Investors look at their statements for the change in the value of the securities and not just the ones that are bought and sold, but also the positions that are held. So, it’s a big ask to expect people to ignore those unrealized gains and losses.

Buffett points out that Berkshire is the largest shareholder of eight of the top S&P 500 companies — the two mentioned above plus Bank of America, Chevron, HP, Moody’s, Occidental Petroleum and Paramount Global.

Berkshire also owns companies that do not trade on the market. BNSF is the second largest U.S. railway, 100% owned. Buffett admits that they were late to enter into the railroad business, but now they are very significant investors.

Berkshire is a bet on the U.S. The U.S. stock market is 60 percent of the value of all global stocks. Will that dominance continue?

The extraordinary success of the last 80 years is unlikely to be repeated after Buffett is gone.

Hilliard MacBeth

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson Wealth or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. The comments contained herein are general in nature and are not intended to be, nor should be construed to be, legal or tax advice to any particular individual. Accordingly, individuals should consult their own legal or tax advisors for advice with respect to the tax consequences to them, having regard to their own particular circumstances.. Richardson Wealth is a member of Canadian Investor Protection Fund. Richardson Wealth is a trademark by its respective owners used under license by Richardson Wealth.

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March 10th, 2023

Posted In: Hilliard's Weekend Notebook

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