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Warren Buffett's 9 Nuggets of Wisdom for Investors: 2021

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Berkshire Hathaway reported $45.2 billion in earnings for 2020 on Saturday, down 48% from the previous year as operating income fell 9%, according to Warren Buffett’s 2021 letter to shareholders.

“Operating earnings are what count most,” wrote Buffett, noting that the firm not only failed to increase earnings but also failed to make any sizable acquisitions — both key goals of the firm.

The decline in operating earnings resulted largely from an $11 billion writedown due almost entirely to Berkshire’s ownership of Precision Castparts (PCC), bought in 2016.

“I paid too much for the company,” wrote Buffett. “I was simply too optimistic about PCC’s normalized profit potential … “laid bare by adverse developments throughout the aerospace industry, PCC’s most important source of customers.” Buffett called the error “a big one.”

Berkshire Hathaway did, however, increase the company’s per-share intrinsic value by retaining earnings and repurchasing about 5% of its shares, according to Buffett. Its stock finished 2020 with a 2.4% gain, its weakest performance since 2015 when shares fell 12.5% and far below the 18.4% gain in the S&P 500.

Throughout this year’s annual shareholder letter, like the others that preceded it, Buffett offered words of wisdom for investors, and he disclosed what he termed a surprise.

He will appear on stage in Los Angeles, along with his partner Charlie Munger and Vice Chairmen Ajit Jain and Greg Abel — considered the two front-runners as his successor — at this year’s annual shareholder meeting set for May 1, which will otherwise be a virtual meeting live-streamed by Yahoo with questions relayed by CNBC’s Becky Quick.

Nowhere in the letter did Buffett mention the coronavirus pandemic, which has claimed over 500,000 lives in the U.S. and more than 2.5 million globally and which was a major factor in global bond markets last year and at times for stock markets as well.

Check out the gallery above for some of Buffett’s latest words of wisdom for investors.

(Cover image: Chris Nicholls/ALM; Shutterstock)