Lessons From Buffett’s 2018 Shareholder Letter

Although America of 2013 still felt shaky from the 2008 recession, Warren Buffett’s 2014 letter to Berkshire Hathaway shareholders boasted a 12% gain in 2013 from the final quarter of 2012. The letter also talked about Buffett’s hopes for Berkshire Hathaway’s future, along with hinting at his investment strategy in the coming years. On a deeper level, the 2014 Buffett letter was a study in focused optimism, diversification, and taking the long view.

The tone of Warren Buffett’s 2014 share holder letter was optimistic, often pointing to Berkshire Hathaway’s tendency to outperform the S&P since 1965. Buffett noted Berkshire’s performance record is partially attributable to Berkshire Hathaway’s history of shrewd acquisitions, according to Buffett. The letter indicated key Fortune 500 company acquisitions included: Heinz, NV Energy, GEICO, and National Indemnity.

Buffet announced Berkshire Hathaway owned 8 ½ of the Fortune 500 companies. “Only 491 ½ to go,” Buffet stated. Buffett praised his employees as he talked about how the diversification of Berkshire Hathaway’s investments were directly related to the company’s solid profits. Buffett advised his investors—even those with lower profiles—to own an array of stocks. The more diverse the investment profile, the more potential there is for profit. The main reason for this is a practical one. If one has shares in several industries, then the overall portfolio does not take a hit if one industry should suffer extensive losses.

Warren Buffett’s 2014 shareholder letter not only provided a snapshot of Berkshire Hathaway’s performance in 2013, but also provided investors with hope and solid financial advice. Buffett’s 2014 optimism appears to have overshot the growth of the stock market since 2013, but it was an effective blueprint of how to survive economic uncertainty using the age-old formula of focus, diversifying one’s portfolio, and investing for the long-term, rather than worrying about short-term peaks and valleys.

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