On February 24th, the stock god Buffett, Berkshire Hathaway, released its 2023 financial report, along with a letter from Buffett to shareholders. The financial report shows that Berkshire Hathaway had a net profit of $37.574 billion for the fourth quarter of 2023, a net profit of $96.223 billion for the full year of 2023, and a net loss of $22.759 billion for 2022. In 2023, Berkshire Hathaway achieved an annual return of 15.8%, although it did not outperform the S&P 500 index, it still achieved stable growth. Every February, Buffett writes a letter to review the gains and lessons he has learned from his investments over the past year. This letter to shareholders, attached to Berkshire Hathaway's annual report, has been regarded by many investors as the "Bible" for providing value investment, and is currently Buffett's 46th shareholder letter. What key information did Buffett include in his letter this year? Jingtai interprets for you.

01 | Salute Charlie Munger. In this year's letter from Buffett to shareholders, Munger was mentioned at the beginning. As Buffett's closest partner, Munger passed away on November 28th last year, only 33 days before his 100th birthday. Munger was referred to by Buffett as the architect of Berkshire Hathaway, while Buffett humbly said that I was just the general contractor. When Charlie passed away, Buffett highly affirmed Munger's wisdom and contribution to Berkshire Hathaway. He said that without Charlie, Berkshire Hathaway would not have been as successful as it is now. At the beginning, Buffett reviewed his past with Munger, from acquaintance to intimate collaboration. Although Buffett and Munger were both born in Omaha, they did not know each other in the early days. Munger spent 80% of his life living in other parts of the United States, and it wasn't until he was 35 years old in 1959 that Buffett first met him. In 1962, Munger decided to work in fund management. Munger's influence on Buffett mainly changed his previous investment philosophy, and Buffett followed his teacher Graham in value investing. In the early days, I liked to buy some cheap and ordinary companies, that is, buying companies whose prices were significantly lower than their value. But Charlie said that if you only buy these mediocre companies, it's difficult to achieve long-term great success. You need to acquire excellent companies at a reasonable price, in other words, abandon everything you learned from Graham. Later, Buffett listened to Munger's words and created a miracle in investment from then on. For a long time, Buffett has held stocks that are basically great companies and have grown together with them. This is much more clever than buying mediocre companies at a cheaper price. So later, Buffett vividly said that it was only after meeting Munger that I truly transformed from an ape to a human. So Buffett made a very interesting analogy in his letter: he said that in the real world, great buildings are associated with their architects, and those who pour concrete or install windows are quickly forgotten. Berkshire has become a great company, and I have been responsible for the construction team for a long time. Charlie should always be considered an architect, and he highly recognized Munger's tremendous contribution to Berkshire's development.

02 | Announcing the "successor" of Berkshire Hathaway. Buffett announced the "successor" in the letter, and Vice Chairman Greg Abel has prepared himself in all aspects to become the CEO of Berkshire Hathaway tomorrow. Currently, Abel operates all non insurance businesses for Berkshire. In addition, Ajit Jain, who is responsible for insurance business, will also appear at this year's Berkshire shareholders meeting. Berkshire is able to quickly respond to market turbulence with huge funds and performance certainty, which may provide us with occasional large-scale opportunities. Although the stock market is much larger than in our early years, today's active participants are neither emotionally stable nor educated better than when I was in school. For whatever reason, the current market is showing more casino like behavior than when I was young. Casino now exists in many households, tempting residents every day. Buffett said that only a few companies in this country can truly drive Berkshire's development, and we and others constantly choose them. Some we can estimate, while others we cannot. And, if we can, their prices must be attractive. Berkshire has recently hit record highs, with A-shares trading at over $620000 and a market value exceeding $900 billion.

03 | "Unlimited" Investment: Looking back at stock market investments in 2023 by the top five Japanese companies and Western Oil, Buffett mentioned Coca Cola and American Express as usual. In his letter, he said, "In 2023, we did not buy or sell stocks of American Express or Coca Cola, but these two companies once again rewarded us with 'inaction' through their profits and dividends." Buffett summarized the experience these two stocks brought him, saying, "When you find a truly outstanding company, persevere, patience will pay off. An excellent company can offset many mediocre decisions." In addition, Buffett also talked about two "investments that are expected to be held indefinitely" - Western Oil and the top five Japanese companies. As of the end of 2023, Berkshire owns 27.8% of Western Oil's common stock. "We particularly like the vast oil and gas resources owned by Western oil companies in the United States, as well as their leading position in carbon capture initiatives." The investment situation in the Japanese stock market occupies a large amount of space in the letter. Berkshire's investment in the Japanese stock market began on July 4, 2019 and currently continues to hold positions in five large Japanese companies, namely Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. "After communicating with their management, we increased our holdings in all five companies last year. Berkshire now holds approximately 9% of each of these five companies. Berkshire has also promised them that its shareholding will not exceed 9.9% in the future. Buffett believes that these five companies are very similar to Berkshire's own business model and have a high degree of diversification.". At the same time, the policies of these companies are very shareholder friendly. In the letter, Buffett also revealed that considering Berkshire's current size, establishing a position through public market purchases requires considerable patience. He stated that currently Berkshire's total investment cost in these five companies is 1.6 trillion yen, and their year-end market value is 2.9 trillion yen. The Japanese yen has depreciated in recent years, with unrealized profits at the end of 2023 calculated in US dollars at 8 billion US dollars. However, due to holding a large amount of Japanese bonds, the depreciation of the yen also resulted in Berkshire earning $1.9 billion at the end of the year.

04 | I believe Berkshire can cope with financial disasters because investing makes it difficult to predict short-term fluctuations and cannot change the macro environment. Munger once said, the macro is that the environment you are in cannot be changed, but you can strive to discover some great companies at the micro level. This is also particularly meaningful for us. We should not complain about the macro environment, but choose good companies that can cross the economic cycle and bear market under established conditions. In his letter, Buffett mentioned that Berkshire Hathaway's net assets are the highest among American companies, reaching $561 billion at the end of last year, while the net assets of 499 other S&P 500 index companies in 2022 were $8.9 trillion. Based on this measure, Berkshire Hathaway currently holds nearly 6% of the market share, indicating that Berkshire Hathaway's assets are already very large, So it is impossible to achieve a doubling within the next five years. However, the investment return of Berkshire Hathaway is very stable, with an annualized return of nearly 20% over the past 60 years, and a cumulative return of approximately 43000 times, creating unprecedented investment performance. Berkshire Hathaway has always been relatively firm in holding some cash, and in this financial report, it held a record $160 billion or even more in cash. This indicates that in the current stock market in the United States, the stock price has reached a historic high. Buffett has maintained a large amount of cash and also slightly reduced his holdings in Apple's stock in the fourth quarter. He is also more focused on risk control, holding a large amount of cash positions, so that he can handle market risks with ease. Buffett emphasized in his letter that he has long held two companies, American progesterone and Coca Cola, both of which have a long history and receive large dividends every year. He also mentioned Western oil companies that have increased their holdings in the past two years, which are companies that bring stable dividends to Berkshire Hathaway.

05 | The 2024 Annual Shareholders Meeting will be held on May 4th local time, and Berkshire's annual shareholders meeting will be held in Omaha. Greg Abel, who is responsible for all non insurance businesses at Berkshire, Agit Jahn, who is responsible for insurance, and Buffett himself will jointly attend this shareholder meeting. Buffett welcomes investors from all walks of life to Omaha in May in his letter. "Maintain an open mind and come to Omaha in May to breathe the air here." "Most importantly, we will launch a new fourth edition of 'Poor Charlie's Book' (Poor)."

Charlie's Almanack. Take away a book and let Charlie's wisdom improve your life, just like me. "