Warren Buffett's Letter to Shareholders

4/10/2015

For 50 years, Warren E. Buffett has been at the helm of Berkshire Hathaway, among the largest publicly held companies in the world. For 50 years, Buffett has been publishing annual letters to shareholders. With our evidence-based, diversified investment strategy, we don’t typically focus on particular companies’ annual announcements, nor do we typically share them as recommended reading.

Warren Buffett’s letters to Berkshire Hathaway shareholders are different.

While his letters lead with the usual corporate analytics, they’re also generously seasoned with Buffett’s legendary combination of wisdom and practicality on business, finance, family wealth, philanthropy, life lessons and “just for fun” jabs. Investment advice aside, they’re simply fascinating reads from a thoughtful man who is leading a life well-lived.

Here are a few of our favorite nuggets from this year’s letter:

On American Enterprise …

“Though we will always invest abroad as well, the mother lode of opportunities runs through America. The treasures that have been uncovered up to now are dwarfed by those still untapped.”

“Charlie and I have always considered a ‘bet’ on ever-rising U.S. prosperity to be very close to a sure thing. Indeed, who has ever benefited during the past 238 years by betting against America?”

“Though the preachers of pessimism prattle endlessly about America’s problems, I’ve never seen one who wishes to emigrate (though I can think of a few for whom I would happily buy a one-way ticket).”

On Wealth and Investing …

“Investors, of course, can, by their own behavior, make stock ownership highly risky. And many do.”

“You can’t get rich trading a hundred-dollar bill for eight tens.”

On Capital Markets …

“One of the heralded virtues of capitalism is that it efficiently allocates funds. The argument is that markets will direct investment to promising businesses and deny it to those destined to wither. That is true: With all its excesses, market-driven allocation of capital is usually far superior to any alternative.”

“Periodically, financial markets will become divorced from reality – you can count on that.”

“No advisor, economist, or TV commentator – and definitely not Charlie [Munger] nor I – can tell you when chaos will occur. Market forecasters will fill your ear but will never fill your wallet.”

On Risk Management …

“We will always be prepared for the thousand-year flood; in fact, if it occurs we will be selling life jackets to the unprepared.”

“When bills come due, only cash is legal tender. Don’t leave home without it.”

“In our view, it is madness to risk losing what you need in pursuing what you simply desire.”

On Ethics and Conflicts of Interest …

“If horses had controlled investment decisions, there would have been no auto industry.”

“Money flows from the gullible to the fraudster. And with stocks, unlike chain letters, the sums hijacked can be staggering.”

On Human Nature …

“If you’ve attended our annual meetings, you know Charlie [Munger] has a wide-ranging brilliance, a prodigious memory, and some firm opinions. I’m not exactly wishy-washy myself, and we sometimes don’t agree. In 56 years, however, we’ve never had an argument. When we differ, Charlie usually ends the conversation by saying: ‘Warren, think it over and you’ll agree with me because you’re smart and I’m right.’”

“To have our fellow owners – large and small [shareholders] – be so in sync with our managerial philosophy is both remarkable and rewarding. I am a lucky fellow to have you as partners.”

Administrative Details
Along with your quarterly portfolio report, we have enclosed information that meets the annual requirement of the U.S. Securities and Exchange Commission to provide clients with our Privacy Policy and Form ADV Part 2 offering.

If you have any questions regarding your portfolio report or the other items, please be in touch. As always, we welcome your suggestions and feedback and value your trust and confidence.

Sincerely,

Byron E. Woodman, Jr.
President

Lee C. McGowan, CFP®
Managing Director