Warren Buffett in his Letter Writes One wonderful business can offset many mediocre decisions

Ronit Kawale
Ronit Kawale  - Senior Editor
2 Min Read

In his annual letter to Berkshire shareholders, Warren Buffett, the chairman of Berkshire Hathaway, emphasized the crucial lesson from the company’s investment journey: patience pays off, and a single exceptional business can compensate for numerous mediocre decisions. In the letter, Buffett also paid tribute to his long-time friend and vice chairman of Berkshire, Charlie Munger.

Buffett highlighted Berkshire’s investment philosophy, underscoring the significance of patience and the impact of a remarkable business. He pointed out that a single outstanding business can offset the inevitable mediocre decisions that are bound to occur.

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Last year, Buffett mentioned two of Berkshire’s long-duration partial-ownership positions – Coca-Cola and American Express. Although not as substantial as Berkshire’s Apple position, each accounts for 4-5% of Berkshire’s GAAP net worth, illustrating the company’s thought processes.

Both Coca-Cola and American Express have a long history, with American Express starting operations in 1850 and Coca-Cola being launched in 1886. Buffett emphasized that Berkshire is not inclined towards newcomers.

Despite attempts to expand into unrelated areas in the past, both companies were mismanaged at times. However, they were hugely successful in their core businesses, adapting to changing conditions. Their products gained worldwide recognition, and the consumption of liquids and the need for unquestioned financial trust are timeless essentials.

Buffett highlighted that during 2023, Berkshire did not buy or sell shares of either American Express or Coca-Cola. Both companies rewarded Berkshire’s inaction by increasing their earnings and dividends. The indirect ownership of both companies increased for Berkshire shareholders due to share repurchases made by Berkshire.

The key lesson from Coca-Cola and American Express, according to Buffett, is to stick with truly wonderful businesses. Patience pays off, and the success of one outstanding business can outweigh the many inevitable mediocre decisions. Buffett also reiterated the importance of price-dependent stock repurchases, emphasizing that what is sensible at a discount to business value becomes imprudent at a premium.

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