You never get tired of Warren Buffett's annual reports, because he actually tells you something. Most annuals say everything's great and highlight some businesses that are doing very well and have terrific pictures of smiling employees.
Buffett's are filled with meat even if, for some, the folksy method of delivery can seem a bit strained given what a hard-headed businessman he really is.
So what? The simple fact is he gives away a ton of information for free and I can only think that's the case because he genuinely wants you to learn about business. If I were teaching a course in business, this document would be on my syllabus because, in many ways, it is the clinic no one else wants to part with so you can learn more than you have a right to, for free. Why the heck do we not have to pay for this?
First things first, I have been recommending Berkshire Hathaway (BRK.B), the stock, since the show began. Why the heck not? Why would you NOT recommend the stock of the greatest financier of our time? It's almost counterintuitive not to.
He runs great businesses, whether they be the insurance titan, the railroad, energy, value-added chemicals or a metal fabricating operation, as well as host of others. Now Precision Castparts joins the ranks of his wholly owned companies -- his latest, now complete, acquisition.
He owns shares in some great businesses and some lesser one but with a cost basis that is to die for: American Express (AXP), Coca Cola (KO), IBM (IBM) and Action Alerts Plus holding Wells Fargo (WFC). Here the record is spottier, but he backed up all four managements with the statement that "these four investments possess excellent business and are run by managers who are both talented and shareholder friendly." For the record, for those looking for criticism of the managements of foundering investments like IBM and American Express, don't bother. He's obviously fine with them.
He also makes clear that he's happy with another underperformer, Bank of America (BAC), another Action Alerts Plus holding, which he has a huge stake -- his fourth largest equity investment and one he says he "values highly." That said, he got a terrific deal when he basically "saved" Bank of America with a gigantic investment, so perhaps he is loath to call out the management that gave him such a break, because that is one disappointing stock.
Takeaways? A couple.
The broadest is that he confirms something that I know is on a lot of peoples' minds: The election has created a "negative drumbeat" that has cast a pall on the views of the future that most Americans have. I have said that can translate into a lower price-to-earnings multiple for all stocks, and I feel even more strongly about that after reading his letter.
Second, Burlington Northern railway (BNSF) had been an underperformer in 2014. With more capital and tighter focus, it turned around, and while Buffett does note that 2016 will likely be a down year, it made me feel that there's still much the other rails can do to make themselves more investable. It made me want to buy Union Pacific (UNP) or CSX (CSX) as they don't have much crude by rail -- a weak business line for Burlington Northern.
Third, the note made you feel great about aerospace, because he's so excited about Precision Castparts. You can understand better why Honeywell (HON) wants so badly to team up with aerospace-oriented United Technologies (UTX). It also made me want to circle back to Alcoa (AA) because Buffett said that Precision Castparts wants to do acquisitions, and when Alcoa splits into two, the highly engineered portion of its business will have about $6 billion in aerospace orders that dovetail perfectly with the business of Precision Castparts.
Finally, while Buffett disagrees with the style of opportunities that his Brazilian partners in Action Alerts Plus holding Kraft Heinz (KHC) seek -- basically going after less-productive enterprises and making them better, as opposed to buying the best of breed and leaving them alone -- I felt real good about the charitable trust's position in the stock, because Buffett seems to have high hopes for the company.
So another year of free tutelage from the master, another year of investable takeaways. What more could you ask for?