Over the weekend, legendary investor Warren Buffett released his annual letter to shareholders, in which he expressed displeasure with his 2012 performance, but also expressed optimism towards the overall economy.
During 2012, Berkshire Hathaway's per share book value rose by 14.4 percent. This was below the 16% increase in the S&P 500. Buffett said he would never have dreamed that a year where his company gained $24.1 billion would be a subpar year, but it was.
He blamed the subpar year on the strength of the broader market. He said that over time, his company would always outperform the S&P 500, but it does best comparitatively during years where the market is down or unchanged.
One interesting bet that Buffett has been making, and continues to stand behind is local newspapers. While most of the world believes that local papers are dying, Buffett believes otherwise. The rise of the internet has changed the way we get our news, but Buffett continues to stand behind local newspapers, saying there is “no substitute” for local newspapers that are working the way they should.
Another topic that he addressed was the possibility of another recession. There has been a lot of debate about whether or not the nation is destined to fall back into another recession, but Buffett does not view this as a real possibility.
The fiscal cliff, debt ceiling, and automatic budget cuts have dominated the news in recent months, increasing fear that the nation may slip back into a recession but Buffett doesn't buy it. He indicated that the only way his top five holdings would shrink earnings would be if the economy tanks, and that is not something he expects.
He also indicated his intention to increase his stake in his four biggest holdings: Wells Fargo (WFC), Coca-Cola (KO), American Express (AXP) and IBM (IBM).
Buffett also had some negative remarks for CEOs who are blaming an uncertain economy for their lack of spending. Indicating that he sees abundant opportunities in the U.S., Buffett spent a record $9.8 billion on plants and equipment last year, and his letter makes it clear that he plans to continue down that path.
He took more shots at nervous CEOs, saying that uncertainty is a fact of life, and should not be an excuse to cut back on spending. He points out that economic uncertainty has existed going all the way back to 1776, and nothing will change that. He says some people sometimes focus on the uncertainties, and at other times choose to ignore them. One thing is for sure, Buffett is choosing to ignore them.
Hopefully Buffett is right about the health of the economy, and 2013 will be another strong year for the both the economy and the stock market.
You can read Warren Buffett's entire shareholder letter here.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va. His articles typically cover big-picture events and forecasting what impact they will have on the stock market. In addition to writing for Fresh Brewed Media, Michael also wrote for AOL's BloggingStocks for three years, focusing most of his attention on the energy and technology sectors. Follow him on Twitter at @MFatMICenter.