Berkshire Hathaway's highly anticipated annual letter to shareholders was released on the evening of February 28, Beijing time. Long regarded as the "bible for value investors," the letter was authored for the first time in 2026 by the new CEO, Greg Abel, instead of Warren Buffett. The letter primarily reviewed Berkshire Hathaway's operational achievements, shortcomings, and strategic reflections for the year 2025.

Traditionally, Buffett's letters have been celebrated for their profound investment wisdom, long-term perspective, and rational decision-making. This year's letter not only signifies Berkshire Hathaway's entry into the "post-Buffett era" but also demonstrates Abel's deep insights into the company's operations while adhering to the core principles of value investing, making it essential reading for investors.

At the end of last year, the 95-year-old Buffett officially stepped down as CEO of Berkshire Hathaway, concluding his legendary 60-year tenure. In a statement last November, he indicated he would "step away quietly," with Abel taking full control of the company's operations. Buffett remains Chairman of the Board, working five days a week and providing advice on major decisions, while the primary responsibility for the annual letter and the main address at the annual meeting has been transferred to Abel. The Berkshire Hathaway Annual Shareholders Meeting will still be held in Omaha on May 2, where Abel and other fund managers will present the company's performance and answer investor questions. Buffett will attend the meeting, seated in the board of directors' section.

Over the past decade, I have attended the Omaha shareholders meeting seven times, listening firsthand to the insights of Warren Buffett and Charlie Munger. Although Munger has passed away, his wisdom endures. This May Day holiday, I will travel to the United States for the eighth time to participate in the meeting, accompanied by a group of investors, using this global gathering of value investors to promote the philosophy of value investing and advance investor education in the Chinese market.

Following tradition, Abel included a long-term performance comparison between Berkshire Hathaway and the S&P 500 index at the end of the letter. In 2025, Berkshire Hathaway's per-share market value increased by approximately 10.9%, underperforming the S&P 500's 17.9% gain. However, over the long term from 1965 to 2025, Berkshire Hathaway's per-share market value achieved a compound annual growth rate of about 19.7%, significantly outperforming the S&P 500's 10.5%. Due to the power of compounding, Berkshire Hathaway's cumulative gain exceeded 60,000 times, compared to approximately 460 times for the S&P 500. In other words, over a 61-year period, Berkshire Hathaway's performance substantially surpassed that of the index.

In the opening section of the letter, Abel first reflected on Buffett's investment philosophy and illustrious achievements. He noted that Warren Buffett is arguably one of the greatest investors in history, whose wisdom has benefited generations. He also praised Buffett as an exceptional CEO. Since acquiring National Indemnity Company in 1967, Buffett consistently focused on building a premier insurance business and utilized insurance float to make extensive investments in core American industries, creating unprecedented long-term performance for Berkshire Hathaway.

Buffett often likened his investment philosophy to the batting strategy of Baseball Hall of Famer Ted Williams. Williams divided the strike zone into 77 areas, choosing to swing only at pitches in the "sweet spot," which led to outstanding results. Similarly, Buffett's investing emphasized discipline, patience, and judgment, focusing on identifying ideal opportunities, waiting patiently, and acting decisively when high-probability opportunities arose. Together with Charlie Munger, Buffett built Berkshire Hathaway into an enduring enterprise, combining world-class capital allocation ability with foresight, ensuring a smooth transition from a founder-driven company to one capable of sustained development for decades to come.

For sixty years, Berkshire Hathaway has treated its shareholders as true partners. Buffett communicated openly and directly with shareholders each year through the annual letter and the shareholders meeting held on the first Saturday of May in Omaha. Buffett continues to serve as Chairman, working five days a week and providing guidance on insurance underwriting, non-insurance business operations, and capital allocation, including equity investments.

Subsequently, Abel recounted his own growth experience since joining Berkshire Hathaway and the mentorship he received from Buffett. He emphasized that the company's culture and values form the cornerstone of its operational framework, guiding its strategic direction and key decisions. Regarding corporate culture and core values, he stressed that Berkshire Hathaway's success relies on its nearly 400,000 employees, who consistently embody the company's culture and values in their daily operations, which is crucial for long-term, stable development. Previously, he had also issued an internal letter to employees reaffirming that the company's culture and values remain unchanged and will be perpetuated.

Berkshire Hathaway is a unique conglomerate, structured to enable rational and efficient capital allocation. The insurance business is its core, while it holds significant investments across various industries. The company's goal is to be an outstanding steward of shareholder capital, maximizing the long-term growth of per-share intrinsic value, and striving to preserve the great legacy built by Buffett and Munger. Abel particularly emphasized that maintaining a low level of debt and adhering to financial resilience and independence are key to Berkshire Hathaway's long-term stability.

Currently, Berkshire Hathaway's holdings of cash and U.S. Treasury bills have exceeded $370 billion, reaching a record high. According to last year's fourth-quarter financial report, the company's cash and Treasury holdings surpassed its stock market value for the first time, with the equity portfolio falling below 50% of total assets. This indicates that Berkshire Hathaway significantly reduced its stock position in anticipation of a potential market peak, reflecting Buffett's longstanding investment principle of being cautious when others are greedy and proactive when others are fearful.

Regarding capital allocation, Abel emphasized deploying shareholder capital into opportunities where risk and return are commensurate. This involves investing in businesses that are well-understood, possess enduring competitive advantages, and have long-term economic prospects, while partnering with management teams of high integrity, deep customer understanding, and an owner-oriented mindset. The company avoids investments that could harm social structures or damage its reputation. It acts swiftly on the few highly confident opportunities while maintaining discipline, allowing the power of compounding to work over time. These criteria form the core framework for evaluating investment opportunities. Berkshire Hathaway's history of maintaining large cash positions does not signify an exit from investing but reflects continuous opportunity evaluation and patient action when it aligns with shareholder interests.

In terms of performance, Berkshire Hathaway reported operating profits of $44.5 billion in 2025, lower than the $47.4 billion in 2024 but above the five-year average of $37.5 billion, indicating stable core operations. Net cash flow from operating activities was $46 billion in 2025, higher than the five-year average, demonstrating strong cash generation capabilities. Investments in insurance, energy, manufacturing, and railroads continued to deliver steady returns.

Regarding its investment portfolio structure, Berkshire Hathaway's holdings are highly concentrated in a select few U.S. companies, including Apple Inc., American Express, The Coca-Cola Company, and Moody's Corporation. These are high-quality assets that the company understands deeply and highly regards for their management, expecting them to continue compounding value over the coming decades. The concentrated investment strategy will persist; however, significant adjustments will be made if the long-term fundamentals of a holding fundamentally change. Buffett consistently emphasized taking concentrated positions in companies that can be deeply understood, while adopting a diversified approach for businesses that are harder to analyze, and recommended that ordinary investors use index funds or ETFs for long-term investment in developed markets.

In closing the letter, Abel mentioned that the 2026 Annual Shareholders Meeting on May 2 will continue to emphasize open communication and direct interaction, anticipating the gathering of investors from around the world in Omaha for this value investing event. Currently, the Chinese capital market is gradually evolving into a pattern of slow, long-term bull market, making adherence to value investment principles particularly important. In recent years, I have creatively proposed the concept of "Value Investing with Chinese Characteristics," attempting to integrate Buffett's value investing philosophy with the realities of the Chinese market for better local application, contributing modestly to the promotion of strategic investment concepts. I also wish all investors good health and successful investments in the new year.