At the end of February, Berkshire Hathaway CEO Warren Buffett wrote an annual letter to the company's shareholders.. The manager told, how he chooses stocks and why he holds a large stake in cash.
About stock selection
“Our goal is to invest in businesses with long-term economic benefits and first-class management. note, we select stocks based on our expectations of long-term performance, not market movements. Important: we don't pick stocks, we choose business.
About core business
"The insurance business will never get old, and the sales volume, usually, grows with the economy and inflation. Our company can and will conduct itself with integrity. Certainly, there are other insurers with excellent business models and prospects. But it will be almost impossible to repeat Berkshire.”.
About the amount of cash
Berkshire's balance sheet is $144 billion in cash and cash equivalents. Of these, $120 billion are US Treasury bills with a maturity of less than a year.. Charlie and I promised, that we will always keep at least $30 billion in cash and cash equivalents. We want, that the company be financially unassailable and not dependent on the kindness of strangers or even friends. We love to sleep peacefully and want, so that our creditors, insurers and customers could also.
But $144 billion? I assure, such an impressive amount is not some crazy patriotism. We still prefer to own the business and keep at least 80% equity capital. But right now we can't find companies, that meet our long-term criteria. We've seen this in the past. These periods are not pleasant., but they don't last forever. Fortunately, in 2020 and 2021 we had attractive capital placement opportunities.”.
About interest rates
“One of the ways to increase the money of our shareholders is to buy shares in good companies. Many of these companies trade at attractive prices from time to time.. But today we have little interest. Low interest rates are pushing up the prices of various assets: stock, apartments, farms, oil wells and so on. Other factors also affect prices, but interest rates are the most".
About the structure of assets
“Many people see Berkshire as a large and strange collection of financial assets.. Really, Berkshire manages a large number of infrastructure assets, than any other American corporation. This was not our goal., but it became a fact. At the end of last year, domestic infrastructure assets on Berkshire's balance sheet exceeded $158 billion.. Berkshire will always build".
Berkshire Hathaway and S stock returns&P 500 since 1965
| Berkshire Hathaway | S&P 500 | |
|---|---|---|
| Average annual | 20,1% | 10,5% |
| Total | 3 641 613% | 30 209% |
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