Warren Buffett – Annual letter to shareholder 2020

I am an eager student of Warrent Buffett’s annual letters as he writes candidly and shares his wisdom freely. Since I began reading his annual letters, my investing has become much better.

In 2020, the world went through a pandemic with covid-19 spreading out throughout the world. Berkshire, however, had a good year.

The following is my takeaways from Warren Buffett’s 2020 annual letter to shareholders.

“What’s out of sight should not be out of mind.” The unrecorded retained earnings are usually building values for Berkshire.

Typical conglomerates:

“Conglomerates have generally limited themselves to buying businesses in their entirety. That strategy came with two problems. One was unsolvable: most of the truly great businesses had no interest in having anyone take them over. Consequently, deal-hungry conglomerates had to focus on so-so companies that lacked important and durable competitive strengths. Second was that conglomerates often found themselves required to pay staggering ‘control’ premiums.”

Berkshire conglomerate:

“Charlie and I want our conglomerate to own all or part of a diverse group of businesses with good economic characteristics and good managers. Whether Berkshire controls these businesses or not is unimportant to us.”

Investing Philosophy:

“Charlie convinced me that owning a non-controlling portion of a wonderful business is more profitable, more enjoyable, and far less work than struggling with 100% of a marginal enterprise.”

“In contrast to the scoring system utilized in diving competition, you are awarded no points in business endeavors for degree of difficulty. Furthermore, as Ronald Reagan cautioned: ‘it’s said that hard work never killed anyone, but I say why take the chance?'”

Relationship to shareholders:

“Charlie and I would be less than human if we did not feel a special kinship with the million-plus individual investors who simply trust us to represent their interests, whatever the future may bring. They have joined us with no intent to leave.”

“In 1958, Phil Fisher wrote a superb book on investing. In it, he analogized running a public company to managing a restaurant. If you are seeking diners, he said, you can attract a clientele and prosper featuring either hamburgers served with a Coke or a French cuisine accompanied by exotic wines. But you must not, Fisher warned, capriciously switch from one to the other: Your message to potential customers must be consistent with what they will find upon entering your premises.
At Berkshire, we have been serving hamburgers and Coke for 56 years. We cherish the clientele this fare has attracted.”

The annual meeting will be streamed online via https://finance.yahoo.com/brklivestream at 1pm EST.

Onward to the annual meeting.

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