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Warren Buffett's annual investor letter is out. Here are the biggest takeaways.

Billionaire investor Warren Buffett is cautioning investors in his Berkshire Hathaway conglomerate not to expect the "eye-popping performance" of its past, due to a dearth of deals at attractive valuations. 

The handful of U.S. companies capable of truly moving the needle at Omaha, Nebraska-based Berkshire have already been picked over, and there are no meaningful acquisition targets outside the U.S., Buffett noted in his company annual shareholder letter, released on Saturday. 

But Berkshire is prepared to pounce should a large-scale opportunity arise, with its cash reserves rising to a record $167.6 billion in the fourth quarter. 

"By both luck and pluck, a few winners have emerged from a great many dozens of decisions. And we now have a small cadre of long-time managers who never muse about going elsewhere and who regard 65 as just another birthday," the 93-year-old Buffett said in his yearly missive, one of the most-read reports in business.

A fond farewell to Charlie

Buffett began with a reverential tribute to Charlie Munger, who died in November just 33 days shy of his 100th birthday.

"Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades," Buffett relayed of his longtime investing partner. "In reality, Charlie was the 'architect' of the present Berkshire, and I acted as the 'general contractor' to carry out the day-by-day construction of his vision."

Munger's relationship with the higher-profile Buffett was "part older brother, part loving father," stated Buffett. "Even when he knew he was right, he gave me the reins, and when I blundered he never — never — reminded me of my mistake." 

Born and raised in Omaha, the elder Munger lived most of his life elsewhere, deciding three years after meeting Buffett that he should take up money management, at 38 years of age, Buffett wrote.

Three year later, in 1965, Munger told Buffett he'd erred in buying control of Berkshire, but since the deal was done, he advised him to add to Berkshire "wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices. In other words, abandon everything you learned," recalled Buffett, who followed Munger's instructions. 

Ready and able

Berkshire's already established succession plan calls for vice chairman Greg Abel to replace Buffett as CEO and two other investment managers to take charge of its stock portfolio. In charge of Berkshire's noninsurance businesses since 2018, Abel "in all respects is ready to be CEO of Berkshire tomorrow," Buffett wrote. 

Born and raised in Canada, Abel lived in Omaha for six years in the 1990s, just a few blocks from Buffett. During that time, the two had never met, according to Buffett. 

Insurance up, utilities down

Berkshire's insurance businesses fared well last year thanks in part to the rising prices in property-casualty coverage, the core of Berkshire's well-being and growth, Buffett noted. "We have been in the business for 57 years and despite our nearly 5,000-fold increase in volume — from $17 million to $83 million — we have much room to grow." 

The same can not be said for Berkshire Hathaway Energy, or BHE, a collection of energy businesses, according to the Oracle of Omaha.

The regulatory environment and climate change is making it difficult to project earnings and asset values in utilities, formerly among the most stable industries, he noted. 

Losses stemming from forest fire-related costs are likely to get worse as climate change increases the frequency and intensity of the blazes that have left some utilities facing a dicey future. 

Keeping and increasing: Occidental, Japanese trade

Buffett intends to retain Berkshire's nearly 30% stake of Occidental Petroleum "indefinitely" but has no plans to own or run the company. He cited Occidental's "vast oil and gas holdings in the United States," and leadership in carbon-capture initiatives as in the nation's interest. 

He also hiked Berkshire's stake in five large Japanese trading houses, saying all "follow shareholder-friendly policies that are much superior to those customarily practiced in the U.S." 

Berkshire now owns about 9% in Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo, after increasing its holdings following a trip by Buffett and Abel last year to Tokyo to talk with their managements. All have been "far less aggressive about their own compensation than is typical in the United States," Buffett added.

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