Warren Buffett releases annual shareholder letter: 5 things to know

By Berkshire HathawayFOXBusiness

Is Berkshire's Greg Abel Buffett's heir apparent?

Berkshire Hathaway CEO Warren Buffett and Berkshire Hathaway Vice Chairman Charlie Munger discuss their impressions of Vice Chair Greg Abel and whether Berkshire Hathaway will continue to thrive without them.

Billionaire investor Warren Buffett released his widely anticipated annual letter to Berkshire Hathaway shareholders early Saturday morning.

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In the letter, Buffett has been known to offer insight into the general operations at Berkshire; general wisdom and business advice; and stock purchase he made over the year (which is perhaps what investors are most eager to see).

These are some of the highlights from this year’s letter.

Investments: Once again, Buffett made no significant stock purchases with Berkshire’s $112 billion pile of cash. The “Oracle of Omaha” -- one of the most famed investors of all time -- said in the years ahead, he and Vice Chairman Charlie Munger hope to move most of their excess liquidity into businesses, but haven’t because of too-high prices.

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BRK.ABERKSHIRE HATHAWAY INC.304,115.00-185.00-0.06%

“The immediate prospects for that, however, are not good. Prices are sky-high for businesses possessing decent long-term prospects,” he wrote, adding, “We continue, nevertheless, to hope for an elephant-sized acquisition.”

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Successor: Buffett, 88, has been notoriously tight-lipped about who will replace him at the helm of Berkshire Hathaway. Last year, he designated two in-house executives -- Ajit Jain and Greg Abel -- as directors of the company, as well as vice chairman. Many speculated at the time that Buffett was grooming them to takeover the company. While he remained mum about who the next CEO of Berkshire will be, Buffett did note that he had some “some good news – really good news” about the performances of Jain and Abel in their new roles.

“These moves were overdue,” he wrote. “Berkshire is now far better managed than when I alone was supervising operations. Ajit and Greg have rare talents, and Berkshire blood flows through their veins.”

Kraft Heinz: Berkshire reported a rare fourth-quarter loss on Saturday, hammered by its 26.7 percent stake in Kraft Heinz, whose stock plummeted following its disclosure that the Securities and Exchange Commission had launched an investigation into its accounting policies.

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KHCKRAFT HEINZ COMPANY31.45-0.43-1.35%

Buffett did not directly address the investigation, but noted that the $3.02 billion writedown was “almost entirely” attributable to the beleaguered food giant.

(He also urged investors to focus on Berkshire’s “forest” -- not its “trees.”)

“Analysis of that type can be mind-numbing, given that we own a vast array of specimens, ranging from twigs to redwoods,” he said. “A few of our trees are diseased and unlikely to be around a decade from now. Many others, though, are destined to grow in size and beauty.”

Geico: The sprawling conglomerate also has earning power concentrated in the insurance sector, including in Geico, which helped to boost its earnings results. Buffett took time in the letter to laud former Geico Chairman and CEO Tony Nicely, who retired last year, for the company’s success.

“By my estimate, Tony’s management of GEICO has increased Berkshire’s intrinsic value by more than $50 billion,” he wrote. “On top of that, he is a model for everything a manager should be, helping his 40,000 associates to identify and polish abilities they didn’t realize they possessed.”

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Politics: Buffett -- who endorsed Democrat Hillary Clinton during the 2016 presidential election -- remained largely apolitical in his letter, noting only how businesses have flourished under bipartisanship.

“Our country’s almost unbelievable prosperity has been gained in a bipartisan manner,” he wrote.

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