market folly

For those of you who haven't had a chance to read this yet (shame on you), here it is: Warren Buffett's annual letter and Berkshire Hathaway's annual report. For value investors and future Buffett wanna-be's, this is must-read material.

One very interesting thing to note about Buffett's letter is how he mentions that many of Berkshire's holdings heavily rely on consumer spending and housing demand. While Berkshire has obviously survived the crisis, those are areas many foresee a very slow recovery in. So, those companies will have to operate efficiently as they continue to face challenges. At the same time though, Buffett took advantage of the crisis to secure many solid deals and acted on his old adage of buying when others are fearful. He even expanded on this with an excellent new quote, saying "When it's raining gold, reach for a bucket, not a thimble."

Additionally, as we assumed when we reviewed Warren Buffett's portfolio, he confirmed that he sold positions to finance his impending acquisition of railroad Burlington Northern Santa Fe. And this purchase continues to signify a growing trend in Buffett's portfolio: he's investing in industries that have monopolies or near-monopolies.

Buffett's letter below gives his take on the economy, his investments, and various Berkshire components. Embedded below is the document:



You can directly download the .pdf here.

Of course a lot of criticism surrounding the letter is the lack of discussion regarding succession plans for when Buffett eventually steps down. This is a legitimate concern for investors and in the past we've posted up a great video that examines potential successor candidates at Berkshire. Many think Sokol will be the man for the job, but we'll have to wait and see.

So while his latest letter didn't provide any breakthrough new information, it's always good to hear his thoughts. For more great investment reads, head to Warren Buffett's recommended reading list.