What Wall Street is taking away from Warren Buffett's annual letter

Investors who wanted billionaire Warren Buffett to address the current state of the world in his annual letter to Berkshire Hathaway shareholders will likely be disappointed, but they can still take some comfort in his consistently rosy long-term outlook for the USA economy.

Legendary investor Warren Buffett told CNBC on Monday that his Berkshire Hathaway (BRK.A) group almost doubled its stake in Apple (AAPL) to 133 million shares worth around $17 billion.

The "massive fees" charged by active fund managers - who often promise to outperform the broader market - can leave savers worse off than if they had simply used a low-priced index fund that tracks a stock-market index, Buffett warned.

Buffett revisited his 10-year wager that the S&P 500 will outperform a portfolio of funds of hedge funds, net of fees and expenses, between January 1, 2008 and the end of the 2017 calendar year. Why?

Buffett's chosen index fund has recorded an 85.4 per cent gain over than time while the hedge funds delivered an average of 22 per cent.

Warren Buffett says he's investing heavily in Apple, believing that once consumers begin using the company's products they aren't likely to stop. He plans to donate the money to Girls Inc. of Omaha.

Warren Buffett is a long-time Democrat who supported Hillary Clinton, but he says he agrees with President Donald Trump on some issues. Despite taking such an interest in AAPL, Buffett doesn't own an iPhone.

But Tim Armour, CEO of Capital Group Cos, which runs the American Funds and invests $1.4 trillion, said index funds can expose investors to losses when markets turn sour. That means Dollars 1 million invested in those funds would have gained USD 220,000.

The letter accompanied Berkshire Hathaway's release of 2016 fourth-quarter and full-year earnings. According to a SEC filing, earlier this month, Gore also exercised options on 70,000 shares of the tech giant.

The billionaire devoted a large section of his widely read Berkshire Hathaway shareholder letter to arguments against stock pickers that charge high management fees and fail to beat the broader market.

He said Berkshire's Apple stake, now at about 133 million shares, was worth about $18 billion based on Friday's closing price and amounted to Berkshire's second-biggest holding.

The 28-page letter made no mention of potential acquisitions. "Charlie and I have no magic plan to add earnings except to dream big and to be prepared mentally and financially to act fast when opportunities present themselves", Buffett said.

"One word sums up our country's achievements: miraculous", Buffett wrote.

"American business - and consequently a basket of stocks - is virtually certain to be worth far more in the years ahead", Buffett wrote in his letter to Berkshire shareholders.

  • Carolyn Briggs