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1 Important Lesson from the Latest Annual Report of Warren Buffett’s Conglomerate

Every year, the Oracle of Omaha, Warren Buffett, releases his firm’s annual report. In it, readers can find a treasure trove of information. This year was no exception. So, let’s take a look at one important lesson I gleaned from the 2016 Annual Report published recently.

Buffett has been a huge proponent of businesses in America and most of the businesses he owns were started in his home country. Recalling America’s growth, he wrote:

“One word sums up our country’s achievements: miraculous. From a standing start 240 years ago – a span of time less than triple my days on earth – Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers…. Starting from scratch, America has amassed wealth totaling $90 trillion.”

Despite all the gains that corporate America has had, he still believes that his homeland will be more prosperous in the future. He goes on to say,

“American business – and consequently a basket of stocks – is virtually certain to be worth far more in the years ahead. Innovation, productivity gains, entrepreneurial spirit and an abundance of capital will see to that. Ever-present naysayers may prosper by marketing their gloomy forecasts. But heaven help them if they act on the nonsense they peddle.”

What Buffett said is not surprising. The US stock market has gained manifold since the early 1900s, despite the market having gone through numerous crises. These include the Great Depression of the 1930s, the dot com bust in the early 2000s, and the most recent Global Financial Crisis.

No matter what the media says and despite the vagaries of the economy, resilient businesses will continue to do well. For example, those feeling unwell will still have to see a doctor and in our local context, car owners will still have to send their cars for inspection according to mandated schedules.

As investors, what we should do is to not listen to the “ever-present naysayers” but focus on the fundamentals of the business we are interested in and decide what the business will be doing five, 10 or 20 years into the future.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.