Down Angle Symbol A symbol in the form of an angle pointing downwards. Berkshire Hathaway CEO Warren Buffett and former vice chairman Charlie Munger. JOHANNES EISELE/AFP via Getty Images
- Warren Buffett praised Charlie Munger as the “architect” of Berkshire Hathaway in his annual letter.
- The investor also called out stock market gamblers who buy “hot stocks” and “lottery tickets.”
- Buffett dismissed forecasters, warned that Berkshire's scale was a challenge and nodded to the AI frenzy.
Warren Buffett paid tribute to Charlie Munger, praised four of Berkshire Hathaway's biggest bets and expressed his frustration in his annual letter to shareholders released Saturday.
The famed investor and Berkshire CEO also called out stock gamblers and speculators, dismissed Wall Street forecasters and even gave a nod to the AI craze while championing his hometown of Omaha, Nebraska.
Munger, Buffett's business partner and Berkshire's vice chairman for more than four decades, died in November at age 99. He shaped Berkshire into a leading global conglomerate and helped Buffett move from bargain hunting to buying companies at fair prices.
“Although I have long been in charge of the construction team, Charlie should forever be considered the architect,” Buffett said in his letter, describing himself as the “general contractor” who brought Munger's vision to fruition.
Echoing last year's letter, the billionaire hailed Berkshire's large holdings in Coca-Cola and American Express, which haven't been touched in more than two decades, as emblematic of his company's long-term investing style.
Buffett also praised Occidental Petroleum, in which he built a nearly 28% stake from nothing over the past two years. He praised the oil and gas explorer and producer for his support of U.S. energy independence and his groundbreaking carbon capture methods.
He also praised Berkshire's roughly 9% stakes in five Japanese trading houses, which he began acquiring back in July 2019. He praised their restraint in executive compensation, their discipline in paying dividends and their long-term, conservative management.
However, Buffett seemed to have resigned himself to the fact that Berkshire has become so big that there is little other direction.
The stock picker explained that Berkshire is now so large – the company had net assets of $561 billion at the end of December, more than any other American company – that it is extremely difficult to make purchases large enough to to significantly accelerate its growth.
“There are only a handful of companies left in this country that have the ability to make a real difference at Berkshire, and they have been chosen endlessly by us and others,” he said, adding that it is also practical outside the United States none exist.
“All in all, we have no way of achieving a stunning performance,” he said.
Buffett also criticized speculators in his letter, noting that stock traders were “neither more emotionally stable nor better informed” than when he was a student. He also pointed out that the proliferation of stock trading apps has made daily buying and selling easier than ever.
“The markets behave much more like a casino today than they did when I was young,” he said. “The casino can now be found in many houses and attracts its residents every day.”
With that in mind, Buffett said he thinks of Berkshire shareholders as long-term shareholders, rather than people who use their excess money to “buy lottery tickets or 'hot stocks.'”
Buffett also ignored the army of experts who predicted market crashes and recessions or gave stock tips on television.
“Experts should always be ignored,” he said, wondering why they would share their predictions if they were sure they would come true. “It would be like finding gold and then giving your neighbors a map showing the location.”
Buffett also noted that Omaha produced itself and Munger; Berkshire's insurance and non-insurance heads Ajit Jain and Greg Abel; and his sister Bertie, whom he described as “one of the biggest investors in the country.”
“So, what's up? Is it Omaha's water? Is it Omaha's air? Is it a strange planetary phenomenon, similar to the one that produced Jamaica's sprinters, Kenya's marathon runners or Russia's chess experts? Do we have to wait for AI to one day provide the answer to this puzzle?” he quipped.