Guidance from the past, charting the future of investing
As I write this, the investment world is turning its collective gaze toward Omaha, Nebraska. The approaching 2025 Berkshire Hathaway Annual Shareholders Meeting on 3 May isn't just another corporate gathering—it's potentially the final curtain call for the most celebrated investor of our time. At 94, Warren Buffett will attend what marks the 60th anniversary of his Berkshire acquisition. While his successor Greg Abel will feature prominently, Buffett's presence carries profound significance. The question hanging in the air isn't just about succession but whether Buffett's value investing philosophy remains the golden rule in today's market landscape.
Berkshire quietly compounds wealth, outpacing the market with resilience
Berkshire's Current Financial Profile: Stronger Than Ever?
Despite fears about what a post-Buffett $Berkshire Hathaway(BRK.B)$ might look like, the company continues to demonstrate remarkable financial health. Q4 2024 figures revealed operating earnings of $11.7 billion, marking a 27% year-over-year increase. Full-year operating earnings reached a record $47.44 billion, significantly outpacing 2023's $37.4 billion. Perhaps most telling is Berkshire's enormous cash pile, which recently surpassed $334 billion—an all-time high that reflects both opportunity-seeking discipline and preparation for economic uncertainty.
Return on equity stands at an impressive 14.42%, far exceeding the S&P 500 average of 11.8%. The conglomerate's diverse operations from insurance to railways and energy have maintained sector-leading profit margins, with GEICO reporting a combined ratio improvement to 81.5% and Burlington Northern maintaining operating margins around 30%. These aren't merely numbers; they're testament to the enduring efficacy of patient capital allocation—the bedrock of value investing.
The Hidden Gems: What Most Investors Miss About Berkshire
What many casual observers overlook is that Berkshire's success isn't merely about buying undervalued stocks. The company has fundamentally shifted from being primarily an investment vehicle to becoming an operational powerhouse. Nearly 70% of Berkshire's current value derives from wholly-owned businesses rather than equity investments. This transformation represents Buffett's adaptation of value principles beyond pure stock selection.
Another overlooked aspect is Berkshire's increasing focus on technology—long considered Buffett's blind spot. After his initial Apple investment in 2016, technology has grown to represent over 45% of Berkshire's equity portfolio. Buffett's expanding relationship with companies like Snowflake demonstrates that value investing isn't about avoiding growth sectors but applying timeless principles of business quality, competitive advantage, and appropriate price to any industry—including technology.
The Master Strokes: Buffett's Value Investing Triumphs
Examining Buffett's most astute value plays reveals why his philosophy endures. Consider Apple—perhaps his most brilliant modern investment. When Berkshire began accumulating shares in 2016 at roughly $100 per share, many analysts viewed $Apple(AAPL)$ as a hardware company facing peak iPhone saturation. Buffett looked deeper, recognising Apple's ecosystem moat and recurring revenue potential. With Apple now trading above $230 and having delivered massive dividends, this investment has generated over $150 billion in value—proving value investing works magnificently when paired with long-term vision.
GEICO stands as another testament to value principles. Buffett began purchasing GEICO shares in 1976, eventually acquiring the entire company by 1996. While others saw merely an insurance provider, Buffett recognised GEICO's low-cost operational model and direct-to-consumer approach as sustainable competitive advantages. GEICO has since grown from the seventh-largest auto insurer to the second-largest, generating billions in 'float' that has fuelled Berkshire's expansion. This showcases how value investing, when applied to identifying business model superiority rather than merely statistical cheapness, delivers compounding returns.
Value Investing Today: Evolution, Not Extinction
The question isn't whether value investing works—it's whether it needs reinterpretation for today's market realities. Traditional value metrics focused exclusively on low price-to-book or price-to-earnings ratios would have missed $Amazon.com(AMZN)$, $Alphabet(GOOGL)$, and even Apple. Modern value investing must incorporate competitive positioning, intangible assets, and future cash flow potential rather than just current financial ratios.
Buffett himself has evolved. His partnership with Charlie Munger transformed his approach from Benjamin Graham's 'cigar butt' bargain hunting to paying fair prices for exceptional businesses. This evolution underscores that value investing isn't static—it's dynamic while maintaining core principles of rational analysis, margin of safety, and business-owner mentality.
Deep roots, dynamic branches: the evolution of timeless investing
The Golden Rule for Retail Investors?
Is value investing still the golden rule for retail investors? I would argue yes—with nuance. The principles remain sound: understand what you own, avoid overpaying, think like a business owner, and maintain long-term perspective. However, applying these principles requires adaptation to changing economic landscapes.
For retail investors, the most valuable aspect of Buffett's philosophy isn't specific stock picks but his psychological approach. Market-beating returns come not from complex strategies but from emotional discipline—avoiding panic selling, resisting FOMO buying, and maintaining conviction through volatility. These behavioural advantages remain as powerful for individuals as for Berkshire.
As Buffett potentially takes his final bow at this milestone shareholders meeting, his legacy isn't just a corporate empire but a timeless investing framework. Value investing isn't merely about finding statistical bargains; it's about cultivating the temperament to see value where others don't and patience to allow that value to compound. For retail investors navigating increasingly complex markets, there may be no more golden rule than that.
@TigerStars @Daily_Discussion @Tiger_comments @Tiger_SG @Tiger_Earnings @TigerClub@ @TigerWire
Comments