Warren Buffett’s annual letter to shareholders of Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) is always a highly anticipated event. The Oracle of Omaha’s folksy wisdom comprises a lifetime’s worth of successful investing experiences, as well as honest explanations of missteps and mistakes.
This year, however, Berkshire Hathaway shareholders and, indeed, the entire investing world, is more keen to read Warren Buffett’s letter than ever.
That’s because Saturday’s release of Warren Buffett’s annual letter to Berkshire Hathaway shareholders marks the 5oth anniversary of his purchase of Berkshire Hathaway, then a down-on-its-luck New England textile company.
In addition to the regular letter, Warren Buffett promised to write an especially long missive this year, laying out his vision for Berkshire Hathaway for the next half-century. And although it will contain the usual combination of wisdom, rumination, apologies and investing lessons, some of the biggest questions are likely to go unaddressed.
At 84, Warren Buffett is still plenty sharp and appears quite physically fit (despite drinking a heroic amount of Coke everyday), but he’s not going to be around forever.
When Warren Buffett does announce a successor, it’s sure to be big news, but thus far he’s been quiet. There are two candidates — Ted Weschler and Todd Combs — to take over the investment portfolio, but Warren Buffett has given no indication as to who will run the company once he’s gone.
It’s certainly possible that Buffett will use this golden anniversary to anoint a successor — it would certainly make sense as part of a road map for the next 50 years — but it’s hard to believe it will happen. Warren Buffett and partner Charlie Munger sure don’t act as if they’re nearing the end of their reign together, for one thing. Besides, an announcement of such importance would make the successor — not the anniversary — the story.
Warren Buffett Themes
What we are sure to get are even more expansive passages on many of Warren Buffett’s favorite themes and lessons. He’s likely to lay out once again his cogent argument against paying dividends or engaging in share buybacks. (In the case of dividends, he figures that Berkshire Hathaway can offer a bigger return for shareholders by investing that cash instead of dishing it out. As for share buybacks, Berkshire Hathaway does indeed buy back a shareholder’s stock, but only at a price that makes the company get the better of the investor.)
We can also expect Buffett to affirm its intention to buy good companies and hold them forever, while leaving management alone. He’ll also likely bemoan the difficulty of making something as massive as Berkshire Hathaway outperform. He’ll also address Berkshire’s cash hoard, arguing for patience since there’s a dearth of really big acquisitions targets (and only the big ones can move the needle on Berkshire’s operations.)
Additionally, he’ll probably explain once again that Berkshire Hathaway shouldn’t be split up after he and Charlie Munger are gone. After all, with railroads, newspapers, energy firms, retail operations and Dairy Queen, Berkshire is a huge mishmash of companies in an age where conglomerates are frowned upon.
It all comes down to Warren Buffett offering a comprehensive and compelling recipe to keep Berkshire Hathaway humming after he and Munger have passed. But as simple as his philosophy may be, it has proven to be awfully hard to match.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
