José Daniel Salinardi for Poder & Dinero and FinGurú
In his latest letter to shareholders published over the weekend, Warren Buffett analyzed his outlook for stocks and what it takes to own a good business, along with other investment tips and strategies. Here are some of the conclusions from Berkshire Hathaway, which reported operating earnings of nearly $50 billion in 2024.
How he views stocks: Berkshire's stock market activity is "ambidextrous." One hand maintains almost total or complete control of its 189 subsidiaries, including GEICO, property and casualty insurance, and railway and utility operations. On the other hand, there is a "small percentage of a dozen very large and highly profitable companies" that are independent stocks. While many investors are increasingly focused on the second hand, whose transactions have recently led to a growing cash accumulation, Buffett says that is not the way to look at it.
Quote: "Despite what some commentators currently see as an extraordinary cash position at Berkshire, the vast majority of its money remains in stocks. That preference will not change. While our ownership in 'marketable securities' dropped last year from $354 billion to $272 billion, the value of our 'controlled non-quoted stocks' increased slightly and remains much higher than the value of the marketable portfolio."
Good businesses over cash equivalent assets: "Berkshire will never prefer the ownership of cash equivalent assets over the ownership of good businesses, whether controlled or only partially. The value of cash can evaporate if fiscal madness prevails. In some countries, this reckless practice has become routine, and in the short history of our country, the United States has come close to the limit. Fixed coupon bonds do not provide protection against runaway currency."
Waiting for the right moment: "We are neutral in our choice of capital vehicles, investing in any variety where we can best deploy savings. Often, nothing seems compelling; we very rarely encounter opportunities up to our knees. Greg [Abel] has vividly demonstrated his ability to act in moments as Charlie [Munger] did."
American exceptionalism: "Berkshire shareholders can be assured that we will always invest a substantial majority of their money in stocks, mainly U.S. stocks, although many of them will have significant international operations."
Some outliers: Buffett likes Japan. He showcased his five holdings in companies like ITOCHU, Marubeni, Mitsubishi, Mitsui, and Sumitomo, which "operate in a somewhat similar manner to Berkshire itself." It is a "small but important exception to our focus on the United States" due to the "financial records, management, and attitude of the companies towards their investors." Capital deployment is key here, as well as appropriate dividends and buybacks, and "far less aggressive compensation programs than their U.S. counterparts." Buffett also significantly increased his holdings of Treasury bills in 2024, given the improvement of yields on highly liquid short-term securities.
José Daniel Salinardi is a National Public Accountant graduated from the Faculty of Economic Sciences at the University of Buenos Aires.
Former Lecturer of Cost Accounting II at the same faculty and former member of the Professional Surveillance Commission of the Professional Council of Economic Sciences of the Autonomous City of Buenos Aires.
He has been a permanent staff official of the Presidency of the Argentine Nation between 1978 and 2000.
He is the general producer of Poder & Dinero, and during 2024 he served as the producer of the program "Panorama 360" which aired on UCL channel in Uruguay, for all of Latin America, the United States, and Spain.
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