Warren Buffett warned that ‘hot’ stocks fade, joked about his age, and celebrated America in his annual letter. Here are the 10 best quotes.

warren buffett
Warren Buffett.

  • Warren Buffett released his yearly letter to Berkshire Hathaway shareholders.
  • The investor warned that frenzies around fad stocks eventually fade.
  • Buffett also discussed bonds, trading fees, and America’s wealth generation.
  • Visit the Business section of Insider for more stories.

Warren Buffett described how hype around “hot” stocks can evaporate, reminded stock traders that their transaction fees fill Wall Street’s coffers, and celebrated American prosperity in his annual letter on Saturday.

The famed investor and Berkshire Hathaway CEO also joked about his age, bemoaned the outlook for bond investors, and admitted to overpaying for Precision Castparts in 2016.

Here are the best quotes from Buffett’s shareholder letter for 2020, lightly edited and condensed for clarity:

1. “Precision Castparts is far from my first error. But it’s a big one.”

2. “Investing illusions can continue for a surprisingly long time. Wall Street loves the fees that deal-making generates, and the press loves the stories that colorful promoters provide. At a point, the soaring price of a promoted stock can itself become the ‘proof’ that an illusion is reality. Eventually, of course, the party ends, and many business ’emperors’ are found to have no clothes.”

3. “In contrast to the scoring system utilized in diving competitions, you are awarded no points in business endeavors for ‘degree of difficulty.’ Furthermore, as Ronald Reagan cautioned: ‘It’s said that hard work never killed anyone, but I say why take the chance?'”

4. “Bonds are not the place to be these days. Fixed-income investors worldwide – whether pension funds, insurance companies, or retirees – face a bleak future.”

5. “Since our country’s birth, individuals with an idea, ambition, and often just a pittance of capital have succeeded beyond their dreams by creating something new or by improving the customer’s experience with something old.”

6. “In its brief 232 years of existence, there has been no incubator for unleashing human potential like America. Despite some severe interruptions, our country’s economic progress has been breathtaking.”

7. “Mrs. B, it should be noted, worked daily until she was 103 – a ridiculously premature retirement age as judged by Charlie and me.” – joking about Rose Blumkin, who sold Nebraska Furniture Mart to Berkshire in 1983. Buffett is 90 and Charlie Munger, his business partner, is 97.

8. “At Berkshire, we have been serving hamburgers and Coke for 56 years. We cherish the clientele this fare has attracted.” – referring to investor Philip Fisher’s advice to public companies to be consistent in their actions and communications if they want to attract a certain kind of shareholder. Fisher compared it to restaurants serving¬†either hamburgers and Coke or French cuisine with exotic wines, but not both.

9. “Investors and speculators in the United States and elsewhere have a wide variety of equity choices to fit their tastes. They will find CEOs and market gurus with enticing ideas. If they want price targets, managed earnings and ‘stories,’ they will not lack suitors. ‘Technicians’ will confidently instruct them as to what some wiggles on a chart portend for a stock’s next move. The calls for action will never stop.”

10. “Investors must never forget that their expenses are Wall Street’s income. And, unlike my monkey, Wall Streeters do not work for peanuts.” – Buffett said a monkey who picked 50 S&P 500 stocks to purchase by throwing darts at a board would make money, as long as it resisted making changes to its portfolio.

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Warren Buffett admitted a ‘big’ mistake, touted Berkshire Hathaway’s past deals, and cautioned traders in his annual letter

Warren Buffett
Warren Buffett.

  • Warren Buffett published his annual letter to shareholders on Saturday.
  • The Berkshire Hathaway CEO made a “big” mistake in overpaying for Precision Castparts.
  • Buffett reminded stock traders that their transaction fees go straight to Wall Street.
  • Visit Business Insider’s homepage for more stories.

Warren Buffett owned up to a major mistake, trumpeted Berkshire Hathaway’s past successes, and drew a line between his long-term shareholders and the meme-stock crowd in his annual letter on Saturday.

The billionaire investor said Berkshire’s focus is boosting operating earnings and making large, high-quality acquisitions. His conglomerate “met neither goal” in 2020 as its operating earnings slumped 9% and it failed to close any major deals, he said.

Moreover, Buffett admitted to overpaying for Precision Castparts, the aerospace-parts manufacturer that Berkshire purchased for $37 billion in 2016. The price tag was a “big” error that fueled an “ugly” $11 billion writedown last year, he said.

Buffett dedicated most of his letter to reflecting on some of Berkshire’s most famous investments. See’s Candies, Geico, National Indemnity, Nebraska Furniture Mart, and Clayton Homes all received a mention.

The 90-year-old investor argued their US origins were a key factor in their success. “These builders needed America’s framework for prosperity,” he said. “Our unwavering conclusion: Never bet against America.”

Buffett didn’t miss the chance to highlight that Berkshire owns $154 billion in US-based assets such as factories and equipment – more than any other US company. AT&T is the runner-up with $127 billion worth, he said.

The Berkshire chief also discussed his shareholder base. He emphasized the “special kinship” he feels to the million-plus individual investors who trust him with their money and embrace Berkshire’s culture of partnership.

Buffett made a distinction between Berkshire’s long-term shareholders and people who buy into the hype around the likes of Tesla, GameStop, and Bitcoin. He reminded traders that the fees they pay to constantly tweak their portfolios flow straight into Wall Street’s pockets.

“The tens of millions of other investors and speculators in the United States and elsewhere have a wide variety of equity choices to fit their tastes,” Buffett wrote. “They will find CEOs and market gurus with enticing ideas.”

“If they want price targets, managed earnings and ‘stories,’ they will not lack suitors,” he continued. “‘Technicians’ will confidently instruct them as to what some wiggles on a chart portend for a stock’s next move. The calls for action will never stop.”

Finally, Buffett revealed that his 97-year-old business partner and Berkshire’s vice-chairman, Charlie Munger, will join him on stage at Berkshire’s shareholder meeting in May.

The event will be held in Munger’s home state of California, after he decided not to fly to its usual Nebraska location last year due to the pandemic.

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