Buffett's annual letter arrived at 8 a.m. eastern time on February 27, 2021.

According to the annual letter, Buffett failed to meet both of his goals in 2020: Berkshire did not make large acquisitions and operating profit fell 9%. The company spent $24.7 billion on buybacks to increase the intrinsic value of each share. But in the long run, Berkshire's market capitalization grew at a compound annual rate of 20.0% between 1965 and 2020, more than 10.2% of the s & p 500. Berkshire's market capitalization grew by an astonishing 28000 times between 1964 and 2020, much higher than the 234-fold increase in the S & P 500 over the same period.

In the letter, Buffett gave new shareholders his share and basic stock by reviewing his half-century of betting on American innovative entrepreneurs and investing in the US infrastructure system. In this way, Buffett indirectly responded to questions about the company's insistence on not sharing bonuses and missing the times.

Gregory Warren (Greggory Warren), an analyst at Morningstar (Morningstar), told the author that the surge in private equity over the past decade and Buffett's insistence on staying out of the bidding war have made it harder to buy quality assets at fair prices. Mr Gregory said Berkshire would gradually shift from a "reinvestment machine" to a "company that rewards investors". He expects Berkshire to step up its buyback efforts, but "as long as Buffett is at the helm, there will be no dividend".

Between 1965 and 2020, Berkshire's market capitalization per share grew at a compound annual rate of 20.0 per cent, more than 10.2 per cent of the S & P 500. Berkshire's market capitalization grew by an astonishing 28000 times between 1964 and 2020, much higher than that of S & P over the same period.

In response to questions:"loyal fans" never give up.

In the game post multi-air war at the beginning of this year, retail investors in the online forum Wall Street betting on (WallStreetBets) like to use the icon of "diamond hand" to show that they will hold a stock firmly for a long time. Buffett's annual letter also popularized his basic set of the older generation of "diamond hands" to new investors.

"more than a million individual investors simply believe that we represent their interests, no matter what may be brought about in the future. They have no intention of leaving. "

Stan Trulson (Stan Truhlsen), who is over 100 years old, is one of them. This is a fellow Buffett who used to be an ophthalmologist. In 1969, Stein became a shareholder in Berkshire along with 10 other young Omaha doctors, and two of the group are now over 90 and continue to own Berkshire Hathaway shares.

Berkshire's unusual and highly valued family of individual shareholders may give you a better understanding of our reluctance to curry favor with Wall Street analysts and institutional investors. The background of Buffett's remarks is the floating hearts and minds brought about by the departure of some well-known "old shareholders".

David Rolfe, chief investment officer of Wedgewood Partners, who began building positions in Berkshire in 1998, cleared Berkshire shares in 2019. He criticized in the open letter that Buffett saw the opportunity and did nothing. Bill Ackerman (Bill Ackman), founder of Pershing Square, who calls himself a "Buffett student", also sold about $1 billion of Berkshire shares in 2020 "to gain flexibility to target higher returns". The latter eventually earned $2.6 billion by shorting U. S. stocks during last year's epidemic.

Buffett's attitude towards the departure of these veteran Wall Street shareholders is that there are different circles and there is no need for forced integration: "there are thousands of investors and investors in the United States who can find stocks that suit their tastes in the stock market." if they focus on target share prices, managing earnings or 'stories'. But Berkshire has offered hamburgers and colas for 56 years. We cherish the investors who are attracted by this taste. "

Buffett also expressed gratitude for the low turnover rate brought about by the group of loyal fans. "after all, who would want their friends, neighbors or marriage to have a high turnover rate? "

Beliefs and shackles:It is difficult to repeat the bottom-reading drama.

One of Buffett's famous quotes is, "if you don't know who the fool is after three rounds, then you are the fool."

Gregory Warren (Greggory Warren), an analyst at Morningstar (Morningstar), told the author that it is undeniable that Buffett's success rate of "elephant hunting" has declined over the past decade, leaving investors complaining that they are holding hundreds of billions of dollars in cash. This is not only due to the general environment, but also affected by the way Buffett himself interacts with the times.

First, large private equity firms manage a substantial increase in funds, providing more ways of financing, so that the "savior" Buffett's advantage is no longer prominent. After the financial crisis of 2008-2009, the amount of money available for acquisitions by private capital increased from about $1.4 trillion at the end of 2009 to $2.4 trillion in 2018. At the same time, other capital parties, including the US federal government, have also provided better financing conditions for bad companies.

One of Buffett's classic cases of bottoming out in the financial crisis is the huge return on "rescuing" Bank of America.

In 2011, Bank of America faced tens of billions of dollars in losses due to non-performing mortgages and legal liabilities. After negotiations with Bank of America, Buffett came to the rescue with a blood transfusion of $5 billion, and the share price rebounded. But Buffett also gets preferred stock with a 6% yield, with warrants, and can buy 700 million shares of Bank of America at any time over the next 10 years at a price of $7.14. The deal not only calmed the market, but also brought $2 billion in dividends to Berkshire shareholders, while Bank of America is still Buffett's second-largest stock investment after Apple after exercising power and continuing to buy voluntarily.

Second, Buffett insists on no malicious mergers and acquisitions and does not participate in the bidding war, which makes him lack of room for circuitous negotiations and difficult to gain.

In 2019, Tiffany, an American century-old jewelry brand and a well-known wedding ring brand, invited Buffett to participate in the bid after receiving a $16.6 billion offer from luxury giant LVMH (LVMH). Buffett has a long history with Tiffany, who bought $250 million of Tiffany bonds during the financial crisis. Analysts believe that if you swallow Tiffany, Berkshire's jewelry brand Boxian (Borshiems) can strengthen the jewelry category and form a joint force.

But Buffett was unwilling to compete with LVMH (LVMH) and decided not to go to the poker table.

In 2017, Buffett's energy company also bid for Oncor Electric Delivery, Texas's largest power transmission company, for a total valuation of $18.2 billion. The Morningstar Research Post predicted that Buffett only needs to raise his offer by another $300 million to $500 million to win, which should not be mentioned, given that the breakup fee is as high as $270 million, but Buffett's deep aversion to the bidding war led him to ignore the wishes of bond investors and was pre-empted by Sempra Energy at a similar price.

Third, while the valuation in the United States has soared, Buffett is not familiar with overseas capital markets, and the opportunity cost for overseas companies to turn to Buffett for help is higher, which makes Berkshire's overseas investment even less impressive in recent years.

By the end of 2020, BYD, an electric car in China, ranked eighth among Buffett's top 10 holdings. This also stems from bottoming in the financial crisis.

In September 2008, during the global financial turmoil, Buffett, recommended by Munger, built a position in BYD at HK $8 per share and bought 225 million shares at HK $1.8 billion, with a stake of 8.25%. Over the past 12 years, BYD's share price has risen nearly 30 times, making it one of the legends in Buffett's portfolio.

Four years ago, Berkshire's second-in-command, Munger, told the author that from a valuation point of view, there are more opportunities in China, but for Buffett and Munger, not knowing Chinese is one of the obstacles to investment decisions. "you need someone who knows more about China to help." After BYD, Buffett's team also sought equity stakes in high-quality assets in China, but to no avail.

Do not short the United States:Bet on entrepreneurs and invest in new infrastructure

Buffett doesn't seem to care much about the fact that there have been few new prey in the past decade. In his letter, he reviewed the history of funding large-scale American start-ups over the past half-century, such as Xishi Candy, Geico Insurance, and (NFM), the Nebraska furniture market, which not only made a lot of money, realized the dreams of entrepreneurs, but also created countless jobs. Buffett also said that Berkshire has become the company with the largest amount of business infrastructure in the United States and will continue to invest in new infrastructure such as new energy.

In 1936, Leo Goodwin and his wife Lillian began to believe that car insurance, a standardized product usually purchased from agents, could be sold directly at much lower prices. With 100000 dollars, the two men competed with large insurers with 1000 times or more capital. The government employee insurance company (later referred to as GEICO) began its long journey. "

In the letter, Buffett recalled growing up with insurance company GEICO: "fortunately, I learned about the potential of this company exactly 70 years ago." In 1937, the first year of GEICO's operation, the volume of business was $238200. Last year the figure was $35 billion. "

In addition to betting on the innovation of the east and west coast represented by Geico, Buffett also used the case of (NFM), a Nebraska furniture market, to demonstrate the opportunities and wealth-making capabilities of the central United States.

At the end of 1946, the net worth of the NFM home market grew to only $72264. The total cash, including the cashier and the deposit account, is $50 (I didn't type it wrong). Buffett said that Berkshire completed its stake acquisition of NFM80% in 1983. "NFM now owns the three largest household goods stores in the United States, and although the COVID-19 epidemic closed stores for more than six weeks, all three stores set sales records in 2020."

On the one hand, Buffett admitted that he had benefited from "America's successful entrepreneurs" and "not shorting the United States". On the other hand, Buffett also admitted that "today, many people have created similar miracles around the world and created prosperity that benefits all mankind."

In addition to investing in entrepreneurs, Buffett invests in the infrastructure of the US economy, including through his railways and energy companies, investing in infrastructure and looking forward to long-term returns.

Buffett believes that Berkshire Energy will become a leader in clean energy in the future, and the company has begun a $18 billion project to transform and expand the western power grid.

"unlike railways, American power companies need to carry out large-scale transformation, and the final cost will be staggering. This effort will absorb all Berkshire Energy's revenue in the coming decades. But we welcome the challenge and believe that the increased investment will pay off appropriately. Berkshire Energy has increased its annual revenue from $122 million to $3.4 billion over the past 21 years.

Greg Abel, 57, at the helm of Berkshire Energy, is considered the number one successor to Berkshire's CEO. In addition to Buffett, another management on the podium who responded to shareholders' questions at the general meeting in 2020 was Greg Abel.

Buffett's annual letter also revealed that affected by the epidemic, the 2021 shareholders' meeting will continue to be held online and will be held in Los Angeles for the first time. It also means that Buffett and Munger will be together again.