Warren Buffett's 8 Nuggets of Investing Wisdom: 2023

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Berkshire Hathaway shares outperformed the S&P 500 from 1965 through 2022, achieving a 19.8% compound annual gain versus 9.9% for the broad market index, Chairman Warren Buffett noted in his annual letter to investors Saturday.

The billionaire investor attributed the company’s performance over the decades to “about a dozen truly good decisions,” good luck that saved him from some bad ones, shareholders holding on to their earnings, and the firm’s long-term investing strategy.

Berkshire Hathaway invests in two ways: buying companies it controls, usually through 100% ownership, and purchasing shares in publicly traded companies, Buffett noted.

“Our goal in both forms of ownership is to make meaningful investments in businesses with both long-lasting favorable economic characteristics and trustworthy managers. Please note particularly that we own publicly traded stocks based on our expectations about their long-term business performance, not because we view them as vehicles for adroit purchases and sales,” Buffett wrote, referring to his business partner, Berkshire Vice Chairman Charlie Munger.

“That point is crucial: Charlie and I are not stock-pickers; we are business-pickers.”

Buffett called it an appropriate time to give a report card on his 58 years managing Berkshire.

In that time, he wrote, “most of my capital-allocation decisions have been no better than so-so. In some cases, also, bad moves by me have been rescued by very large doses of luck. … Our satisfactory results have been the product of about a dozen truly good decisions — that would be about one every five years — and a sometimes-forgotten advantage that favors long-term investors such as Berkshire.”

In 2022, Berkshire achieved a record $30.8 billion in operating earnings, excluding capital gains or losses on equity holdings, Buffett said.

Berkshire, however, reported a $22.8 billion net loss for 2022, fueled by $53.6 billion in investment losses, including unrealized losses in its holdings; that compares with $89.8 billion in net earnings in 2021.

Earnings including capital gains “are 100% misleading when viewed quarterly or even annually,” Buffett wrote. While capital gains are “hugely important … their quarter-by-quarter gyrations, regularly and mindlessly headlined by media, totally misinform investors,” he said.

See the gallery for some nuggets from Buffett’s annual shareholder letter.

(Image: Chris Nicholls/ALM; Shutterstock)

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