Warren Buffett’s annual letter to Berkshire Hathaway shareholders: Key takeaways

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Updated: February 27, 2017 6:37:08 PM

Billionaire investor Warren Buffett reiterated his rosy long-term outlook for the US economy and his distaste for high Wall Street fees in his annual letter to Berkshire Hathaway shareholders that always draws a big audience.

While reiterating his long-term outlook for a prosperous America, Buffett mostly steered clear of politics this year.

Billionaire investor Warren Buffett, also known as Oracle of Omaha, reiterated his rosy long-term outlook for the US economy and his distaste for high Wall Street fees in his annual letter to Berkshire Hathaway shareholders that always draws a big audience. The letter which was released last week also describes the performance of the more than 90 companies that Berkshire owns. Here are some takeaways from the letter:

Steered clear of politics this year

While reiterating his long-term outlook for a prosperous America, Buffett mostly steered clear of politics this year. “I’ll repeat what I’ve both said in the past and expect to say in future years: Babies born in America today are the luckiest crop in history,” wrote Buffett, who has said he thinks the economy will be ‘OK’ under President Donald Trump. Buffett is a longtime Democrat who supported Hillary Clinton in last year’s campaign.

Low-cost index funds

Buffett also explained about the advantages of low-cost index funds. He said he estimates that wealthy investors who use high-priced advisers have wasted more than $100 billion over the past decade. “When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients,” Buffett wrote. “Both large and small investors should stick with low-cost index funds.” “The problem simply is that the great majority of managers who attempt to over-perform will fail. The probability is also very high that the person soliciting your funds will not be the exception who does well,” Buffett wrote.

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Avoid airlines

Buffett raised eyebrows last fall when he invested more than $9 billion in airline stocks after years of urging investors to stay away from the airline sector. Berkshire is now one of the biggest shareholders in American Airlines, Delta Air Lines, United Continental and Southwest, but he has offered little explanation for his change of heart other than to say airlines are better businesses after all the consolidation in the industry.

ALSO READ: Warren Buffett, Oracle of Omaha, has bought 133 million Apple shares in 2017. Here’s why!

Lauded immigrants

He lauded immigrants and their contribution to the growth of the US economy, amid President Donald Trump’s anti-immigrant stance, in the annual letter . “Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers,” he wrote in the letter to shareholders of his massive Berkshire Hathaway conglomerate.

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Berkshire Hathaway’s full-year earnings

The letter accompanied Berkshire Hathaway’s release of 2016 fourth-quarter and full-year earnings. The company reported a net profit of $6.3 billion in the October-December period, a gain of nearly 15 per cent from a year ago. For all of 2016, net profit came in at $24.1 billion, slightly lower than the prior year.
Berkshire, which has stakes in Kraft Heinz, Coca-Cola and a number of other companies, and recently invested in Apple, has benefited from the Wall Street rally after Trump’s election. Berkshire gained $27.5 billion in net worth during 2016, Buffett said.

Earlier today, Oracle of Omaha also said that he has bought 133 million Apple shares in 2017 because he likes the business. He further said, “Apple has a lot of technology but it is a consumer company”. “Tim Cook has been extremely intelligent about using the capital,” he added. Stating that Apple might pip Berkshire to a trillion dollar valuation, Buffett said continuity of the iPhone among consumers is ‘huge’. “I see kids sticking to the iPhone and upgrading to newer models”.

(With inputs from Reuters)

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