Good morning.

In the fuss and bother of work and life, it can be hard to set a few minutes aside just to read and think. So maybe you haven't yet had the chance to read Warren Buffett's annual letter to Berkshire Hathaway Inc.'s shareholders, which he released on Feb. 25.

Four points jumped out at me.

If you want to make fewer mistakes, make fewer decisions. Mr. Buffett, who's run Berkshire for 58 years, wrote:
Most of my capital-allocation decisions have been no better than so-so. In some cases, also, bad moves by me have been rescued by very large doses of luck.

...Our satisfactory results have been the product of about a dozen truly good decisions – that would be about one every five years.

Let that sink in:

One of the world's best investors attributes nearly all his superior performance to approximately 12 decisions.

Warren Buffett gets good ideas roughly twice a decade.

If you're getting what seem like good investing ideas twice a year, twice a month, twice a week, twice a day, twice an hour, how likely are they to make a meaningful, enduring contribution to your long-term results?

Buybacks aren't all bad. As I recently pointed out, share repurchases are neither an evil nor a panacea. They can be abused. But, on average, buybacks don't enrich insiders or starve companies of sorely needed capital.

Mr. Buffett put it succinctly:
Imagine, if you will, three fully-informed shareholders of a local auto dealership, one of whom manages the business. Imagine, further, that one of the passive owners wishes to sell his interest back to the company at a price attractive to the two continuing shareholders. When completed, has this transaction harmed anyone? Is the manager somehow favored over the continuing passive owners? Has the public been hurt?

The stock market is a yo-yo, but businesses aren't. Mr. Buffett wrote:
We own publicly-traded stocks based on our expectations about their long-term business performance, not because we view them as vehicles for adroit purchases and sales. That point is crucial: Charlie [Munger, Mr. Buffett's partner] and I are not stock-pickers; we are business-pickers.

He added:
It’s crucial to understand that stocks often trade at truly foolish prices, both high and low. "Efficient" markets exist only in textbooks. In truth, marketable stocks and bonds are baffling, their behavior usually understandable only in retrospect.

Just look at Berkshire Hathaway itself.

In 2022, Berkshire's stock shot up almost 20% in less than three months. Then it fell by roughly 30% in the next three months. Then it gained more than 10%, fell back more than 10%, rose almost 20%, and finally faded a bit at year end.

When all was said and done, the stock gained 4% for the year.

What about the business? Did the fundamental value of Berkshire's insurance and energy and manufacturing and real-estate and railroad businesses swing wildly up and down over the course of a single year?

Of course not.

You will never succeed as a long-term investor – and I happen to think there's no other kind – unless you learn to look past the spasmodic behavior of stocks and focus instead on whether businesses have durable advantages.

Finally, the stock market is the perfect place for patience. Mr. Buffett (who was born in 1930) pointed out that he's been investing for 80 years:
The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.

Unless you use leverage, or borrowed money, you can't lose more than 100% on a stock. But your potential gains are unlimited.

So, if you put an equal amount of money into 10 stocks and nine go to zero, but you hold the other for decades and make 100 times what you initially paid for it, the value of your total investment will grow tenfold – even though you were wrong about almost everything.

People often complain that the stock market is a rigged game. And so it is. It's rigged against the impatient – and in favor of those who can let their winners run. The longer you can let them run, the more rigged a game you get to play.

You can read the rest of Mr. Buffett's letter here.

In our last issue, I asked:

Do you own ESG funds? Why or why not?

Readers expressed intensely different views on these funds that purport to make the world [E]nvironmentally cleaner, [S]ocially fairer and [G]overned better.

Investing is about financial return. Such considerations as environmental and social "good," and much of what passes today as "governance," are vague and indefinable irrelevancies. They might correlate with financial considerations and might not. If an ESG fund makes you feel virtuous, go for it. But don't expect to eat virtue for breakfast or use it to pay rent.
—Graydon DeCamp, Elk Rapids, Mich.

I do have about 5% of my portfolio invested in an ESG fund. The fees are higher for the fund, about triple the cost just like you have mentioned. The higher cost is why I only have a small fraction in an ESG fund. I would invest more, if the fees were comparable to my other investment funds.
—Chris Gillett, Portland, Ore.

Energy Supplies Growth!
—Kenneth Yap, Singapore 

Yes, people do care about the future of the environment and other causes, thank goodness. Am I wearing a halo? OK then.
—Kate McCarthy, Westlake, Ohio

If I could cheaply buy an index fund of stocks eschewed by the ESG crowd, I'd be tempted.
—Mark Waldron, Dayton, Ohio

We make financial decisions based on a broad spectrum of factors: book value vs. market value, free cash flow, potential sales growth, etc. But the mission of the company is an important factor as well. And how they conduct themselves in our economy to many is a very important factor in whether an investment is worthwhile.
—Frank Brannon, Atlanta

When I want to create social change I donate to my favorite causes and/or volunteer — that way I can be reasonably certain I'm being effective and not performative.
—Harley Manning, Reading, Mass.

IMHO, it's just another scam/wrinkle to transfer some naive snowflake's cash into their account.
—Marvin Devoe

My own view? Too many ESG funds cost too much. And I don't think most ESG funds do much — if anything — to make the world a better place, as my colleague James Mackintosh showed last year.

But maybe you don't expect your ESG fund to make the world better. Maybe you just don't want to invest in companies you think are making the world worse.

In that case, I don't see anything wrong with buying an ESG fund, as long as you pay close attention to fees, you confirm that it doesn't own companies you disapprove of and you accept that its returns might not be great.

Realistic expectations will help you avoid being greenwashed.

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Be well and invest well,

Jason

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Happy is the man that findeth wisdom, and the man that getteth understanding. For the merchandise of it is better than the merchandise of silver, and the gain thereof than fine gold.
—Proverbs, 3:13-14.