Five interesting facts about Warren Buffett’s latest annual letter

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Over the weekend, Warren Buffett released his latest annual letter to Berkshire Hathaway shareholders. For many investors, Warren Buffett's annual letter is highly anticipated, offering valuable insights and market commentary to investors worldwide.

Here are the top 5 interesting facts from the letter, along with key takeaways for investors.

1. Record Tax Payments

Berkshire Hathaway paid US$26.8 billion in corporate income taxes to the U.S. government in 2024, a figure Warren Buffett highlighted as exceeding that of any other American corporation, including trillion-dollar tech giants. He noted that this amount represented about 5% of all corporate taxes paid in the U.S.

Unlike many other profitable companies, Berkshire Hathaway is one of the rare companies that does not pay out dividends, instead reinvesting profits to generate more returns for investors.

Lesson to be learned – When investing, investors should focus on the total returns generated by a company, rather than judging it solely on dividend yield.

2. Massive Cash Pile

Berkshire's cash reserves surged to an unprecedented US$334 billion by the end of 2024, nearly doubling the $168 billion from the previous year. Buffett emphasized that despite this 'extraordinary cash position,' the company remains committed to deploying the majority of its capital into equities, particularly American ones, rather than holding cash equivalents in the long term.

Lesson to be learned – Although it's prudent to hold a certain percentage of assets in cash or cash equivalents, one should always consider deploying funds to equities, particularly those of fundamentally sound companies, to take advantage of long-term growth.

3. Reflections on Mistakes

Warren Buffett has admitted that he made mistakes during his tenure at Berkshire Hathaway, particularly in assessing the future economics of businesses when making investments through stock purchases or acquisitions, as well as in evaluating the abilities and integrity of managers hired by Berkshire.

Lesson to be learned – Besides looking at financial statements and balance sheets, evaluating the board of directors and senior management of a company is equally important. A rogue member of a company can cripple it in a devastating way.

4. Increases in Japanese Investments

It's been more than 5 years since Berkshire began purchasing shares in five Japanese companies that operate very successfully in a manner somewhat similar to Berkshire itself. The five companies are (in alphabetical order) ITOCHU, Marubeni, Mitsubishi, Mitsui, and Sumitomo. Warren Buffett has expressed admiration for these companies due to their effective capital deployment, strong management, and investor-friendly approach. Additionally, Warren Buffett mentioned that Berkshire Hathaway has consistently increased its yen-denominated borrowings.

Lesson to be learned – There are growth opportunities outside of the U.S. Investors who know how to take advantage of cheap borrowing and use it to invest in quality companies can reap additional rewards.

5. Schools don’t determine calibre

Warren Buffett mentioned that when Berkshire Hathaway selects its successors, he never considers where a candidate attended school. He agreed that although there are great managers who attended the most famous schools, many talented individuals of good calibre attended less prestigious institutions or even did not bother to finish school. He also quoted his friend, Bill Gates, who decided it was far more important to get underway in an exploding industry that would change the world than to complete his studies.

Lesson to be learned – Do not simply judge a person solely by their school resume. Similarly, when investing in companies, a CEO from a top school may not always be the best CEO. Often, many successful CEOs come from less prestigious schools or backgrounds.

Conclusion

It's always insightful to receive words of wisdom from Warren Buffett, especially when understanding his philosophy on life and investing. At FSMOne, we share some similarities with his approach to long-term investing. We believe investors should diversify their portfolios, look beyond the U.S. market, and pay attention to corporate governance.

Hence, at FSMOne, we aim to provide you with quality research ideas, as well as the necessary tools to formulate a long-term portfolio, including 0% regular saving plans for ETFs, low flat fee rates for ETF trading, and 0% sales charges for Unit Trusts.

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