On Saturday, Berkshire Hathaway released its annual letter to shareholders alongside its fourth-quarter earnings results. Penned by Chairman Warren Buffett, the annual letter is one of the most widely read documents in the investing world, as shareholders and analysts look to the ‘Oracle of Omaha’ for timeless wisdom

This year’s letter was shorter than in past years, but Buffett still covered a variety of hot topics. Below are five key takeaways from the letter that investors should note.

1. Changes to the Annual Meeting

Often referred to as the “Woodstock for Capitalists,” Berkshire Hathaway’s annual shareholder meeting has been a must-attend event for investors for decades. What began as a small gathering in the 1980s has transformed into a global spectacle, drawing thousands of shareholders, fund managers, and investment enthusiasts to Omaha each year.

The 2025 meeting, scheduled for May 3rd, will feature a few notable changes to its format. The traditional Saturday morning movie segment has been eliminated in favor of an earlier start to Q&A at 8:00 AM.  The morning session will feature Buffett, Greg Abel, and Ajit Jain, and pause at 10:30 for a 30-minute break. The afternoon will be limited to just Buffett and Abel and will conclude at 1:00 PM, an earlier stop than in years past. Despite these adjustments, the event remains a great opportunity for shareholders to hear directly from Buffett, and to explore products from the various Berkshire-owned brands within the exhibit area.

2. Berkshire reported strong results for the year

Along with the annual letter to investors, Berkshire reported strong earnings results for the prior quarter and year. Buffett has long favored operating earnings over GAAP earnings to assess performance, as the latter includes volatile unrealized capital gains and losses from its equity portfolio. Operating earnings surged 71% in Q4 and ended 2024 up 27%, driven by strong performance from GEICO and Berkshire’s other insurance businesses.

3. The Mountain of Cash Continues to Grow

Berkshire ended 2024 with $321.4 billion in cash and Treasury Bills, a record high and a 3.6% increase from the prior quarter. The growing cash position stems from an absence of share buybacks coupled with a net sale of marketable securities, reflecting Buffett’s cautious stance amid elevated market valuations. The S&P 500 currently trades at a price-to-earnings (P/E) ratio of 27, well above its long-term average of 19. With markets trading at elevated valuations, Berkshire sees few compelling investment opportunities that can meaningfully impact its portfolio, even including its own shares.

Buffett reassured shareholders that this cash buildup does not signal a shift in strategy, stating:

“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.”

He further emphasized:

“Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned.”

4. Berkshire Will Add to Its Long-Term Bet on Japan

International stocks continue to be an area where Berkshire has been a buyer. Berkshire began purchasing shares in a handful of Japanese conglomerates nearly six years ago. These businesses (ITOCHU, Marubeni, Mitsubishi, Mitsui, and Sumitomo) operate in a similar fashion as Berkshire in that they have ownership interest in a large array of other businesses.

Berkshire, which has historically been focused on owning U.S.-based businesses, became interested in the Japanese companies, given their low valuations relative to U.S. companies. Buffett indicated an intention to add to their ownership in each business and suggested the holding period would likely extend decades into the future.

5. Uncle Sam, Capitalism, and the Magic of Compounding

Buffett highlighted Berkshire as a prime example of the powers of capitalism, long-term reinvestment, and compounding. Over the past six decades, Berkshire has paid over $101 billion in corporate income taxes, including a record $26.8 billion in 2024 alone, making it the largest taxpayer in U.S. history. This staggering tax contribution is a byproduct of Berkshire’s commitment to retaining and reinvesting earnings rather than distributing dividends.

Buffett credited America’s capitalist system for Berkshire’s extraordinary growth, underscoring that disciplined reinvestment and the power of compounding remain the ultimate drivers of long-term wealth creation.

Source: MarketWatch

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