SPRING FORWARD WITH WISDOM: 5 KEY INSIGHTS FROM BERKSHIRE’S 2023 ANNUAL LETTER
I’m writing this in the fresh, promising early spring, post a typical gloomy end of winter where I have to digest my Dolphins disappointment once again, and the lull in quality sports activity. Amongst this gloom, there's a beacon of hope and wisdom that always shines brightly around this time: the Berkshire Hathaway annual shareholder letter, penned by the legendary Warren Buffett.
For those who frequently visit this blog or are among my valued clients, you're well aware of the deep admiration I hold for Buffett's insights into investing and wealth management. His yearly dispatch is eagerly awaited by millions of investors globally, celebrated for its straightforwardness and profound wisdom.
Having delved into this year's letter, I've unearthed several nuggets of knowledge that are not only insightful but also essential for sharing. Here are the 5 critical takeaways from the 2023 Berkshire Hathaway Shareholder letter:
Be yourself
One thing that we at Julius Wealth Advisors and Berkshire have in common is our firm sense of self. We understand who we are, who we are not, and crucially, how to bring our philosophy of investment and wealth building to life for our clients. Our commitment to trust and transparency is why we regularly communicate through quarterly letters, our "Wealth of Knowledge" blog, and "The Big Bo $how" podcast. Importantly, we don't adhere to rigid schedules for communication; we're available when our clients need us, and we reach out proactively.
Our approach is all about open sharing of knowledge and insights, aiming to empower you with the tools necessary for financial success. We see our relationship with each client as unique, valuing them not as entries in a ledger but as individuals with distinct aspirations and challenges. Your trust is paramount, and we treat your financial journey as a collaborative endeavor rather than a mere transaction.
I want to express my heartfelt gratitude to each client who has joined us on this path. A special welcome goes to our 50th client, a milestone reached through organic growth fueled by word-of-mouth and referrals from our satisfied clientele. In an era dominated by social media personas, it seems that being genuine and leading with integrity, knowledge, and passion still holds immeasurable value.
Decades Over Days
Berkshire Hathaway's diverse portfolio encompasses five main operating divisions, excluding their significant publicly traded investments. Among these, their substantial stakes in the Railway, Utility, and Energy sectors stand out. It's noteworthy that these sectors experienced downturns relative to the previous year, with Railway earnings decreasing by 14% and Utilities and Energy by 40%. Such figures might alarm the casual observer or the short-term focused segments of Wall Street.
Yet, Berkshire’s strategy is distinctively long-term. Setbacks, while not ideal, are expected and strategically managed. Warren Buffett, and Berkshire at large, maintain a positive long-term outlook on these industries, emphasizing investments designed to yield returns over decades, not days.
Buffett has confidently stated, "Rail is essential to America's economic future. A century from now, BNSF will still be a cornerstone asset for both the country and Berkshire. You can count on that." This perspective underscores a crucial philosophy: focusing less on short-term fluctuations allows the long-term picture to often stabilize, then flourish.
More than a Homefield Advantage
Buffett has been a lifelong supporter and investor in homegrown businesses. He truly believes in this country and its potential both now and in the future. This sentiment is reflected by many U.S investments. However, this patriotism can stop some from looking at opportunities abroad. Buffett is one that has avoided this trap, and highlighted the performance of 5 Japanese firms that Berkshire is invested in.
"An additional benefit for Berkshire is the possibility that our investment may lead to opportunities for us to partner around the world with five large, well-managed and well-respected companies," Buffett said.
Like all positions taken by Berkshire, these are seen as long-term investments, with eyes for growth over the long term. If you’re looking for new opportunities, it can pay to have an open mind to what is happening beyond our borders.
The Best Often Win Out
One of Buffett’s most consistent and widely shared investment philosophies is to only own the best businesses. In this year’s letter, he made mention of businesses that have been in operation for over 100 years, and despite the markets, politics, and other factors, have stood the test of time.
When it comes to these businesses, Buffett makes very little movement with them. He understands them, what set’s them apart, and let’s them do their thing. This approach is very straight forward, but not commonplace among many “investors.”
A few carefully weighted decisions often perform better than a series of choices and decisions made in rapid succession. Football works in much the same way. On a given play, a quarterback would have a set amount of passing options. Provided everyone does their jobs, he simply has to respond to what the opposition defense does. He reads, passes, and the team moves forward. Knowing your teammates, your opponent, and what set’s them apart, is often what separates the Tom Brady and Patrick Mahomes of the world apart from the rest.
The same approach can be taken with your wealth. You review the many options in front of you, narrow your choices to only the very best, set your positions, and let the businesses do the rest. Buffett isn’t a trader, and neither should you be. You don’t need to be. The fewer decisions and actions you make, the lesser the chances of making a mistake.
No One Does it Alone
Last year saw the passing of a truly influential figure to me and many others, Charlie Munger. Charlie was not only a prolific and successful investor, but he has also been credited by Buffett himself as the “architect” behind Berkshire Hathaway. Understandably, he touched on the passing on of his right hand and the impact he had on the business during his lifetime.
From the outside, most people know Buffett, and many would recognize him on the street. Fewer would recognize Munger or the work he does behind the scenes. Julius Wealth Advisors seeks to operate in much the same way. Our aim isn’t to claim the glory, but rather, sit back and let you take the spotlight. After all, we are in the business of making your goals a reality, not our own. We don’t succeed unless you do.
Furthermore, much like Munger, we aren’t here to scold you for your mistakes. Instead, we are here to walk along the path with you, help you should you stumble, and continue along the way with you. I can’t say this enough, we don’t succeed unless you do.
The fact of the matter is that no one does it alone. Whether it’s raising a family, building wealth, or achieving a dream, you can’t do it on your own. Even someone who is widely regarded as one of the greatest investors of all time needed a right-hand-man to help him along on the journey.
When it comes to building your personal wealth, or managing the portfolio you already have, you need the right person in your corner. At Julius Wealth Advisors, we endeavor to be the calm, knowledgeable, and honest voice of reason that focuses on steering you in the right direction toward achieving your goals. If you’re ready to take this journey with us, we’d enjoy hearing from you.
Disclosures:
This piece contains general information that is not suitable for everyone and was prepared for informational purposes only. Nothing contained herein should be construed as a solicitation to buy or sell any security or as an offer to provide investment advice. The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the information cannot be guaranteed. Past performance does not guarantee any future results. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. For additional information about Julius Wealth Advisors, including its services and fees, contact us or visit adviserinfo.sec.gov.