The D&O Diary: Thinking About Warren Buffett’s Latest Letter to Berkshire Shareholders

Consistently outperforming the stock market is challenging. Many professional investors fail over time. A few good years are quickly forgotten amid years of underperformance.

There have been a few exceptions in the world of money management. The best-known is Warren Buffett. He has managed to roughly double the performance of the stock market over the past 50 years. The result? The creation of one of the largest companies in the world today.

Buffett released his annual Berkshire Hathaway (BRK-A) shareholder letter last week. In it, he went into detail regarding several factors behind his long-term success.

One of the most important factors is Buffett’s long-term view. While markets may drop from time to time, betting against American companies over the long term is not a successful strategy.

And when markets are overly bullish, as may be the case now, some caution is warranted.

Currently, Buffett is sitting on $167 billion in cash. That can be deployed during a crisis to buy great companies at reasonable prices.

That strategy served Buffett well during the late 1970s. And again following the 2008 financial meltdown.

The large cash position allowed for big investments yielding big returns. That even included 10 percent yielding bank bonds.

At a time when AI and other tech names are driving the market higher, Buffett’s outperformance continues to stand out.

To read the full analysis, click here.