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Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) released its 2024 shareholder letter on Saturday.

In this letter, Chief Executive Officer Warren Buffett shared important insights regarding market dynamics, Berkshire’s annual performance, investment strategies, and enduring lessons.

Below are three key takeaways from the letter to help you refine your investment approach.

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1. Embracing Mistakes

Buffett started the 2024 letter by acknowledging Berkshire’s mistakes, suggesting that errors are a natural part of investing. Accepting this reality allows Berkshire to concentrate on its overall performance rather than fixating on every misstep. The focus is not just on getting it right, but also on making big wins.

In baseball terms, batting average measures hits against total at bats, while slugging percentage assigns greater value to doubles and home runs. Berkshire has a respectable batting average, but its slugging percentage is remarkable due to strategic investments that yield substantial long-term gains. Successes like GEICO and the long-term holdings of Coca-Cola and American Express exemplify this approach. Moreover, its significant investment in Apple has also contributed greatly to Berkshire’s wealth.

These solid gains overshadow numerous smaller mistakes. As Buffett stated, “Mistakes fade away; winners can forever blossom.” Investors should incorporate this mindset: it’s less about perfection and more about consistent performance with the occasional standout investment.

2. Understanding Your Investments

Berkshire continues to chart its own path, relying on its unique judgment rather than succumbing to market trends. Its core business remains property and casualty (P&C) insurance, where it has seen substantial success. In 2024, Berkshire reported $22.69 billion in operating earnings from insurance underwriting and investment income—significantly higher than its other business segments.

Recognizing its strengths, Berkshire avoids venturing into unfamiliar territories like cryptocurrency or aggressively pursuing artificial intelligence. This cautious approach mirrors Buffett’s advice for individual investors: only invest in what you know. If pondering an investment in an unknown sector, take time to learn about it. For those uncertain about specific stocks, diversified options like exchange-traded funds (ETFs) can provide exposure without deeper risk.

It is essential to align investment choices with individual risk tolerances. Retirees focused on preservation may prefer conservative income-generating options over volatile growth stocks. Understanding the fundamentals of any investment is crucial, especially during market fluctuations.

3. Evaluating Berkshire’s Cash Holdings

Berkshire’s significant cash reserves have attracted attention. By the end of 2024, it reported $330.81 billion in cash, cash equivalents, and short-term U.S. Treasury bill investments, surpassing the $271.59 billion it had in equity securities. Buffett reiterated that the value in non-quoted controlled equities far exceeds that in its marketable portfolio, illustrated by Berkshire’s $1.03 trillion market capitalization, suggesting its underlying business value is approximately $400 billion.

As mentioned in the shareholder letter, “Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities—mostly American equities.” This indicates that while Berkshire is cautious about current market valuations, it has not lost sight of value opportunities, especially in U.S. businesses, even as it reduces stock holdings in favor of sound business reinvestment or stock repurchases.

For example, since beginning to invest in five Japanese companies—ITOCHU, Marubeni, Mitsubishi, Mitsui, and Sumitomo) in July 2019, Berkshire’s investment has grown from $13.8 billion to $23.5 billion, yielding about a 70% return.

So, Berkshire’s cautious stance isn’t indicative of a market exit; rather, it reflects a focus on sustainable investments and areas of known expertise.

Berkshire’s Consistency Brings Remarkable Returns

The unwavering adherence to its investment principles has allowed Berkshire to achieve impressive returns and maintain a robust Stock price. In 2024, Berkshire slightly outperformed the S&P 500, particularly notable given the surge in mega-cap stocks like Nvidia and Meta Platforms, which Berkshire does not hold. Throughout this year, Berkshire has also outpaced several top growth stocks.

While monitoring Berkshire’s public equity investments is informative, the real wisdom lies in Buffett’s shareholder letters, which provide guidance on long-term investment strategies.