Every year when Warren Buffett, the "Oracle of Omaha", releases his company's annual results, he also writes a letter to his shareholders. In this letter, he discusses the company’s performance, outlines future prospects, and elucidates his investment philosophy. Consequently, each year's "Letter to Shareholders" garners significant attention from the global business community, investors, and media.
Here are some key highlights from this year's letter that could be beneficial for both investors and entrepreneurs:
**On PetroChina**
In 2002 and 2003, Berkshire Hathaway acquired a 1.3% stake in PetroChina for $488 million. Based on this price, PetroChina’s market capitalization was approximately $37 billion. By the second half of last year, PetroChina's market value had surged to $275 billion. We believed this valuation was in line with other major oil companies, so we sold all our shares for $4 billion.
Additionally: Due to the capital gains from selling PetroChina, we paid $1.2 billion in taxes. This amount is equivalent to the U.S. government's total expenditure over four hours, including defense and social security...
**On Investors' Expectations of the Stock Market**
Let’s do a quick math problem: Assume you expect the stock market to yield an annual return of 10% this century, with 2% coming from dividends and 8% from stock price appreciation. That means you're predicting the Dow Jones Index will reach 24,000,000 points by the year 2100 (it’s currently at 13,000). If your financial advisor guarantees double-digit returns every year, you might want to share this calculation with them. Beware of smooth-talking expert advisors; when they dazzle you with their talk, it’s usually the time they’re lining their own pockets.
**On Sovereign Wealth Funds**
Sovereign wealth funds have recently become a hot topic as they've been aggressively purchasing stakes in American companies, sparking intense debate. This situation is self-inflicted by Americans and not the result of foreign governments hatching any conspiracy. The massive trade deficit is the reason why foreign governments are heavily investing in the U.S. When the U.S. sends $2 billion daily to other countries around the world, these countries must invest that money somewhere. They chose U.S. stocks rather than treasury bonds, so what is there to complain about?
The weakening of the dollar is not OPEC's or China's fault. Other developed countries, just like the U.S., rely on oil imports and compete with Chinese products.
**A Little Joke**
The funniest story I’ve heard during this U.S. presidential campaign involves Mitt Romney. He asked his wife Ann, “Back when we were young, did you ever dream in your wildest fantasies that I would run for President of the United States?” Ann replied, “Dear, you weren’t in my wildest dreams.”
When we first ventured into property and casualty insurance in 1967, even in my wildest dreams, I never imagined we would achieve what we have today.