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Warren Buffett's Annual Letter 2014

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Warren Buffett is such a tease - first publishing an exerpt from his annual letter to shareholders, before publishing the full letter. Since I love reading Buffett, and got some responses from my writeup on the exerpt of his letter, I decided to do another writeup looking at his full letter (click through the link to read it). Most of the original material was in the exerpt, here's what I found interesting in the remaining bit of the report:

Best investor in world underperforms S&P500 over last 5 years

The first thing I note is that the last 5 years have been a disaster for Buffett's record - the per-share book value of Berkshire has underperformed the S&P 500 by 22%. However, over the last 7 years Berkshire has outperformed the S&P 500, and it's fairer to look over that period as it more resembles a complete market cycle than the last 5.

Quotes

Previous writeup on Exerpt

Nobody has had a bigger influence on my investing style than Warren Buffett - I religiously listen to what he has to say. The major deviation in our styles is that I don't think he puts anywhere near as much weight as I place on director trades. Speaking of director trades, there were a spate of director sales on the JSE today - here's the ones I think were meaningful : Famous Brands, Super Group (btw, yesterday SPG reported that Allan Gray have built a 20% stake in the company) and BSI Steel. I'm sitting on quite a bit of cash in my portfolio at the moment, and seeing all these director sales is not encouraging me to invest.

Back to Buffett: Here's an excerpt from his annual letter published in Fortune Magazine (click to read - I've summarised some points below, but it's far better to read the original).

He starts off by speaking about 2 property investments he made:

Key takes:

This isn't from this year's letter, but I thought I'd reproduce some thoughts I've jotted down in previous years on competitive moats, as they are pertinent to the ability to estimate future earnings ranges:

 

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