Warren Buffett's Annual Shareholder Letters: Key Takeaways

Here are LCM Capital Management's takeaways from Warren Buffett's Annual Letter to Shareholders.

Everyone is human and makes mistakes so own them – No one is perfect not even the Oracle of Omaha and he said so, he has made plenty of mistakes and has the words "mistake" or "error" 16 times in his letters to shareholders between 2019-2023. Most importantly he says is what he learned from Charlie Munger was, "Problems cannot be wished away. They require action, however uncomfortable that may be."

The death of the 60/40 portfolio is highly exaggerated, diversification matters and dull boring investments should be a part of everyone's portfolio – Ever since the Federal Reserve began their unprecedented interest rate hiking spree, first talking about it in January 2021, there have been plenty of "experts" who have either questioned or stated that the traditional 60% stocks/40% bonds portfolio is doomed or dead or questioned why anyone would own bonds. I'd say Mr. Buffett would disagree, "we were aided by a predictable large gain in investment income as Treasury Bill yields improved…."

Investing is a marathon not a sprint – Yes, it's a cliché often used in my industry but one that my firm, LCM Capital Management lives by and clearly Mr. Buffet believes the same, "over time, we think it highly likely that gains will prevail"

Stocks Rock – Even when the stock market is down, as it is so far in 2025, stocks should always be a part of one's portfolio and not just domestic equities. The reality is most Fortune 500 companies are multi-national conglomerates and that diversification can help since the U.S. is not always the leading stock market performer. According to Mr. B, "a great majority of our money remains in equities.  That preference won't change" and while these companies may be domestically based "many have international operations of significance"

Don't Speculate – While it might be fun and exciting, most investors don't have the stomach nor the pocket book to speculate or what my firm likes to call "guesses." Buy good companies and hold them (please see above). Mr. Buffett said regarding their Japan investments and yen-denominated borrowings- "all are at fixed rates no "floaters." Greg Abel (CEO in waiting) and I have no view on future foreign exchange rates and therefore seek a position approximately currency-neutrality"  

Its ok to pay a lot in taxes, it means you made a lot of money – "Berkshire last year made four payments to the IRS that totaled $26.8 billion."  I've yet to find anyone in my 37 years in this business who enjoys paying taxes, however, if you do, more than likely it means you made money. I say more than likely only because if you have read or followed any of our previous posts on Benzinga you know my firm hates mutual funds, as a matter of fact, we call them the Great American Rip-Off. One of the reasons is taxes. Most mutual fund investors are unaware of the fact that if you buy a fund and it's held in a taxable account (i.e. non- IRA) and it makes a distribution, you owe the taxes on it even if you just bought it or never participated in the gain of the fund.

Family First and Call, Don't Text – "My wise good-looking sister Bertie and I talk regularly on Sunday's using old-fashion telephones for communications." If you are fortunate enough to have siblings, children or parents still around, call them, don't text or email, sure that's easier but as Theodore Roosevelt said, "Nothing worth having comes easy." Personally, I have lost two very good friends as well as a few children of very good friends in the last few years and I miss them dearly. Don't pass up the opportunity to call a family member or friend even if it's just to say "hi", trust me, neither of you will regret it!