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Warren Buffett sees greater opportunity in 2013

warren-buffett

Billionaire investor Warren Buffett speaks in Omaha, Neb., on Nov. 14, 2011 at an event to raise money for the Girls Inc. charity organization.(Photo: Nati Harnik, AP)

Story Highlights

  • Warren Buffett released the much-anticipated annual letter to shareholders Friday
  • Investors were keenly interested in what the Oracle of Omaha said about the Heinz deal, economy
  • Buffett's thought on the housing market and his health were also of interest

Warren Buffett lamented his Berkshire Hathaway didn't perform better in 2012, but said he's optimistic about the U.S.' future and urged other CEOs to do the same in his much anticipated letter to shareholders.

Interest was particularly high in this year's letter, released Friday, as shares of Buffett's conglomerate, Berkshire Hathaway, hit an all-time high Thursday as many of the company's bets made last year and prior are starting to pay off. The annual letter contains Buffett's thoughts on money, investment and business, ahead of the company's annual shareholders' meeting, this year scheduled for May 4.

BUFFETT: Read his annual letter to shareholders[1]

HIGHLIGHTS: Buffett's words of investing wisdom[2]

"Buffett was characteristically bullish on America at a time CEOs seem skittish," says Lawrence Cunningham, author of "The Essays of Warren Buffett: Lessons for Corporate America." "He encouraged other CEOs to be less cautious and less nervous."

Pearls of wisdom and folksy advice is what investors expect from Buffett's note and this year's edition didn't disappoint. Some highlights included comments on:

• Performance relative to Standard & Poor's 500. Buffett launched the letter on a sour note, pointing out that for the ninth time in 48 years, the company's percentage gain in book value, 14.4%, was less than the Standard & Poor's 500's total return gain of 16%. He added that while Berkshire has never lagged the S&P 500 for a five-year period, the S&P 500 has outpaced Berkshire over the past four years.

• Criticism of reluctant CEOs. Buffett scoffed at other CEOs who cite "uncertainty" for not investing in projects. "At Berkshire, we didn't share their fears, instead spending a record $9.8 billion on plant and equipment in 2012, about 88% of it in the United States." Buffett adds to says "Opportunities abound in America."

Buffett continued to beat up on nervous CEOs, saying "Of course, the immediate future is uncertain: America has faced the unknown since 1776. It's just that sometimes people focus on the myriad of uncertainties that always exist while at other times they ignore them."

• The Heinz acquisition. Buffett said a great regret of 2012 was not finding a big acquisition. "Our luck,however, changed early this year." Buffett commented on Jorge Paulo, the investor that is buying Heinz along with Berkshire Hathaway. "We couldn't be in better company," Buffett wrote.

HOLDINGS: Buffett's '13 Berkshire Hathaway portfolio changes[3]

• The insurance business. Berkshire's insurance operations "shot the lights out last year," Buffett wrote. The business generated $73 billion of "free money" for the company to invest. "This is truly having your cake and eating it too," he wrote. "When I count my blessing, I count GEICO twice."

• Future leadership. Buffett talked about Todd Combs and Ted Weschler, the company's new investment managers. Buffett said the company "hit the jackpot with these two," adding in very small type, "They left me in the dust as well."

• Berkshire's public investments. The company's biggest public investments, it's "Big Four," all had "very good years," Buffett says. Those holdings are American Express, Coca-Cola, IBM and Wells Fargo. Berkshire has increased its stakes in Wells Fargo, boosting its stake to 8.7% from 7.6% in 2011, and IBM, going to 6.0% from 5.5%.

• Faith in newspapers. Buffett took a large portion of his letter to defend his recent decision to buy 28 daily newspapers for $344 million. While the newspaper industry's advertising and circulation faces issues, Buffett said that well-run newspapers will be attractive investments. "People will seek their news - what's important to them - from whatever sources provide the best combination of immediacy, ease of access, reliability, comprehensiveness and low cost," Buffett wrote. "Buffett gave a spirited defense of investments in the newspaper industry," says Vahan Janjigian of Greenwich Wealth Management.

But while Buffett was bullish about the economy, the letter is a reminder to Berkshire investors on how it's increasingly hard for the company to outperform the market as it gets larger, Janjigian says. As for Berkshire lagging the S&P: "It's important for investors to realize this is going to be a more common thing since the company is so big," Janjigian says.

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