On Saturday evening Beijing time, Berkshire Hathaway released its 2023 annual report and an annual letter from Buffett shareholders.
The financial report shows that Berkshire Hathaway's operating profit for the fourth quarter of last year reached $8.48 billion, a year-on-year increase of 28%. The annual operating profit reached 37.35 billion US dollars; In addition, with the huge floating profit of "Stock God" in investment in 2023, Berkshire Hathaway's net profit attributable to shareholders for the fiscal year reached $96.223 billion. Of course, Buffett himself does not like this method of reporting net profit, believing that this data is misleading and "meaningless.".
Thanks to the strengthening of operating profits, the cash level on Berkshire's books has also continued to rise. By the end of last year, Berkshire's cash/short-term treasury bond bonds and other liquidity reserves had reached a record $167.6 billion. In the previous quarter, Berkshire continued to repurchase $2.2 billion in stocks, bringing the total repurchase amount for the year to $9.2 billion.
Of course, investors are more interested in hearing about Buffett, a 93 year old contemporary stock god, and his insights into stocks and investments.
Key point 1: Salute to Munger
Buffett's longtime partner Charlie Munger passed away on the eve of his 100th birthday, so in this year's Berkshire annual report, the letter from Buffett paying tribute to Munger is at the forefront.
Full text: Buffett pays tribute to Munger: The Forever Berkshire Hathaway Architect
In this letter, Buffett referred to Munger as Berkshire's "architect," while he himself played the role of the "general contractor," day after day fulfilling Munger's vision.
Key point 2: Not mentioning apples, but praising Yuntong and Coca Cola
Due to Berkshire's announcement of a reduction in its holdings of Apple (as well as a series of stocks) in its previous 13F chart, Wall Street is also closely monitoring the description of the stock market by the stock god.
Unfortunately, Buffett did not mention Apple in his annual shareholder letter, but after last year's letter, he also named two other heavily held stocks - American Express and Coca Cola.
According to Berkshire's annual report, as of the end of 2023, 79% of the company's stock investments were focused on five companies, in addition to Apple's $174.3 billion, Bank of America ($34.8 billion), Chevron ($30 billion), American Express ($22.4 billion), and Coca Cola ($25.4 billion).
Buffett stated that American Express began operating in 1850, and Coca Cola was launched in 1886 at a pharmacy in Atlanta. These two companies have been attempting to expand into unrelated fields for many years, but have been almost unsuccessful in these attempts, and there have been instances of mismanagement in their past history (but not now). However, both companies have achieved great success in their foundational businesses, becoming globally recognizable names.
Throughout 2023, Berkshire did not purchase or sell any shares of American Express or Coca Cola, yet these two companies once again rewarded Buffett's inaction by increasing their profits and dividends. Buffett retorted, "Can I create a better global business than these two? It's impossible."
Buffett summarized, "What have you learned from investing in Coca Cola and American Express?"? When you find a truly amazing enterprise, stick to it. Patience pays off, and a great company can offset many inevitable mediocre decisions. (The lesson from Coke and AMEX? When you find a truly wonderful business, stick with it. Patient pays, and one wonderful business can offset the many medical decisions that are inevitable.)
After talking about Coca Cola and American Express, Buffett changed his tone and introduced two other investments he expected to maintain indefinitely - Japanese stocks and Western oil.
Key point three: Japanese stocks
Buffett disclosed in his shareholder letter that Berkshire currently holds nearly 9% of shares in five Japanese companies (Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo). After investing in Japanese stocks starting in July 2019, Berkshire's investment cost in these five companies was approximately 1.6 trillion yen, and by the end of 2023, the holding value of these companies was 2.9 trillion yen. However, due to the weakening of the Japanese yen exchange rate, Berkshire's unrealized return in US dollars is 61% ($8 billion).
It is worth mentioning that since neither Buffett nor his successor Greg Abel believed in their ability to predict mainstream currency trends, most of Berkshire's positions in Japanese stocks were purchased using 1.3 trillion yen bonds issued in Japan.
Buffett reminds shareholders to be aware that the management of these five companies is not as proactive in their own compensation requirements as American companies, and they only use about one-third of their earnings for dividends. The large amount of retained funds is used to establish numerous businesses and to a lesser extent for stock repurchases. Like Berkshire, these five companies are also unwilling to issue shares.
Key point four: No interest in controlling Western oil
Buffett stated that as of the end of 2023, Berkshire owns 27.8% of Western Oil Company's common stock and also has stock warrants, allowing them to choose to significantly increase our ownership at a fixed price. Although Berkshire enjoys these warrants, it has no interest in acquiring or managing Western oil companies.
The stock gods emphasize that they are particularly optimistic about the large amount of oil and gas held by Western oil companies in the United States, as well as their leading position in carbon capture, although the economic feasibility of this technology still needs to be verified.
Key point 5: Annual shareholder meeting
Due to Munger's passing, there will only be three people on the stage of this year's Berkshire shareholders meeting: Buffett, Greg Abel, and Ajit Jahn.
For the well-known successor to Buffett, the stock god also emphasized in this year's letter that from all aspects, Abel is ready to take over as CEO of Berkshire tomorrow.
This year's shareholder meeting will be held on May 4th local time in Omaha. Buffett also stated at the end of his shareholder letter that he will provide the fourth edition of "Poor Charlie's Encyclopedia" this year. The stock god emphasized that "Charlie's wisdom will improve your life, just like my life.".