Although we read a lot at Burgundy, there is little that is considered “mandatory” reading. Warren Buffett’s annual letter to shareholders might top the list. Not long after the letter to the shareholders of Berkshire Hathaway is posted online, a keen Burgundian will quickly forward the link to all members of the firm. For disciplined value investors, Mr. Buffett’s words always present a clear and concise reminder for why we choose to invest the way we do.
In this year’s letter, Mr. Buffett frankly discusses both his successes and failures over the past year. He talks about succession planning, and his optimism about the eventual revival of the U.S. housing market. He presents an insightful opinion on the value of share repurchases as only a truly long-term investor can appreciate (and admits that many will not agree with him).
The highlight of the letter, in my opinion, can be found under the heading “The Basic Choices for Investors and the One We Strongly Prefer” (pages 17 through 19). In this section, Mr. Buffett discusses the dangers of currency-based investments, and his views on investing in speculative assets in contrast to productive ones. It is here that he announces to his thousands of followers that, “right now bonds should come with a warning label” and criticizes investments in gold for “being neither of much use nor procreative.” These pages are a must-read for thoughtful investors.
To read Berkshire’s annual shareholder letter, please follow this link.