Lessons from Warren Buffett: Key Takeaways from Berkshire’s 2024 Annual Report

Operating Earnings and Segment Contributions

Berkshire Hathaway reported $47.44 billion in operating earnings for 2024, a 27% increase from $37.35 billion in 2023. The fourth quarter alone saw a 71% year-over-year surge to $14.53 billion, driven by robust performance in insurance underwriting and investment income. Despite this growth, Buffett noted that 53% of Berkshire’s 189 operating businesses experienced earnings declines, underscoring the conglomerate’s reliance on its insurance and treasury holdings to offset weaker segments.

The insurance division emerged as the primary growth engine, with operating earnings rising 51% year-over-year. Higher short-term interest rates bolstered investment income from Treasury bills, which Buffett described as “predictably large”. GEICO’s turnaround under Todd Combs, marked by improved underwriting discipline and cost efficiencies, contributed significantly to this performance. Meanwhile, non-insurance segments — including manufacturing, services, and retail — grew operating income by 11%, demonstrating resilience amid economic uncertainties.

Equity Adjustments and International Investments

Berkshire’s equity portfolio underwent notable changes in 2024. The conglomerate reduced its Apple stake from over 900 million shares to 300 million, while selling 117 million shares of Bank of America, retaining a 9% ownership. These sales, coupled with strategic acquisitions in utilities and the Pilot truck stop chain, lowered Berkshire’s marketable securities from $354 billion to $272 billion. Buffett did not explicitly justify the Apple divestment, but analysts speculate valuation concerns and sector rotation played roles.

Internationally, Berkshire doubled down on its five Japanese trading houses — ITOCHU, Marubeni, Mitsubishi, Mitsui, and Sumitomo — which Buffett praised for their prudent capital allocation and conservative management. He highlighted their dividend increases, share buybacks, and modest executive compensation as alignment with Berkshire’s ethos. These holdings, now representing a significant portion of Berkshire’s international exposure, benefit from Japan’s corporate governance reforms and trade-friendly policies.

Equities Over Cash: A Philosophical Stance

Despite amassing a record $334.2 billion in cash reserves, Buffett reiterated his preference for equities, stating, “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses”. The cash pile, nearly double 2023’s $167.6 billion, reflects limited buying opportunities in a richly valued market rather than bearishness. Buffett emphasized that most shareholder capital remains deployed in equities, particularly U.S. stocks with global operations, ensuring long-term compounding.

Greg Abel’s Ascendancy

Buffett’s letter formalized the transition to Greg Abel, who will soon assume the CEO role. Abel, currently Vice Chairman of Non-insurance Operations, earned praise for his operational acumen and alignment with Berkshire’s culture of transparency. Buffett noted Abel’s readiness to “seize significant investment opportunities,” comparing his analytical rigor to Charlie Munger’s. The succession plan aims to preserve Berkshire’s decentralized structure and long-term focus, with Abel set to author future shareholder letters.

Corporate Governance and Shareholder Communication

Buffett underscored the importance of truthful shareholder communication, warning against “fooling shareholders” and self-deception. This ethos will guide Abel’s tenure, ensuring continuity in Berkshire’s candid reporting style. The conglomerate’s governance framework, which prioritizes operational autonomy for subsidiaries, remains intact, mitigating risks associated with leadership transitions.

The Strategic Role of Liquidity

Berkshire’s $334 billion cash reserve, while sparking speculation about market timing, serves multiple strategic purposes. Historically, Buffett has accumulated liquidity ahead of downturns to exploit distressed assets, as seen before the dot-com bust and 2008 crisis. Current macroeconomic headwinds — including elevated equity valuations, inflationary pressures, and geopolitical tensions — justify this caution. Buffett cautioned that “paper money can see its value evaporate if fiscal folly prevails,” urging investors to prioritize businesses with pricing power.

Market Opportunities and Patience

The letter implicitly critiqued today’s investment landscape, where “nothing looks compelling” for capital deployment. Buffett’s restraint contrasts with retail investors’ chase for momentum stocks, reinforcing his adage: “Be fearful when others are greedy”. While Berkshire’s cash hoard may seem excessive, it positions the firm to act decisively during market dislocations, much like its 2008 Goldman Sachs and Bank of America deals.

Unprecedented Tax Contributions

Berkshire paid $26.8 billion in corporate income taxes in 2024, exceeding payments from any U.S. company, including tech giants. This underscores Buffett’s long-standing advocacy for equitable tax policies and corporate citizenship. He urged the government to “utilize [tax revenue] wisely,” supporting vulnerable populations and maintaining currency stability.

Critique of Fiscal Policy

While avoiding direct political commentary, Buffett warned against fiscal irresponsibility, emphasizing the need for a “stable currency”. His remarks reflect concerns over inflation and deficit spending, which could erode purchasing power and market stability. By aligning Berkshire’s lobbying with shareholder interests, Buffett balances pragmatism with advocacy, avoiding partisan entanglements.

U.S.-Centric Business Model

Approximately 85% of Berkshire’s revenue originates domestically, insulating it from trade disputes and currency fluctuations. This domestic tilt, spanning sectors like utilities, railroads (BNSF), and retail, provides predictable cash flows amid global volatility. Buffett acknowledged subsidiaries’ international challenges, particularly tariff impacts, but affirmed that Berkshire’s core remains “Made in America”.

Japanese Investments as a Strategic Hedge

Berkshire’s Japanese holdings offer a counterbalance to its U.S. focus, capitalizing on Asia’s growth while mitigating regional risks. The trading houses’ diversified operations — spanning energy, commodities, and logistics — provide exposure to global trade without overreliance on any single economy. Buffett’s endorsement signals confidence in Japan’s economic reforms and long-term value creation.