In his 2008 Berkshire Hathaway Shareholder Letter, Warren Buffett explains that while the stock market has been positive in 75% of the past 44 years, it is impossible to predict future performance. Instead, he focuses on four goals for Berkshire Hathaway to ensure its success. Here’s an excerpt from the letter:
Take a look again at the 44-year table on page 2. In 75% of those years, the S&P stocks recorded a gain. I would guess that a roughly similar percentage of years will be positive in the next 44.
But neither Charlie Munger, my partner in running Berkshire, nor I can predict the winning and losing years in advance. (In our usual opinionated view, we don’t think anyone else can either.)
We’re certain, for example, that the economy will be in shambles throughout 2009 — and, for that matter, probably well beyond — but that conclusion does not tell us whether the stock market will rise or fall.
In good years and bad, Charlie and I simply focus on four goals:
- maintaining Berkshire’s Gibraltar-like financial position, which features huge amounts of excess liquidity, near-term obligations that are modest, and dozens of sources of earnings and cash;
- widening the “moats” around our operating businesses that give them durable competitive advantages;
- acquiring and developing new and varied streams of earnings;
- expanding and nurturing the cadre of outstanding operating managers who, over the years, have delivered Berkshire exceptional results.
You can read the entire letter here:
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