Warren Buffett's letter to Berkshire Hathaway shareholders: 5 things to watch for

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Berkshire Hathaway, the conglomerate of which Buffett is CEO and chairman of the board, reported a $65.3 billion gain in net worth in 2017, bolstered largely by the sweeping tax code rewrite pushed through Congress at the end of the year.

That means the overall gain from the company's 1964 initial public offering to the end of previous year would have shown a per-share increase in market value of 2,404,748 percent, according to the letter, compare to the broader market's gains of 15,508 percent during that time, when including dividends.

The new law, greatly touted by President Donald Trump, lowered the tax rate paid by U.S. corporations from 35 percent to 21 percent, allowing many to undertake major new outlays and others to book significant fiscal gains.

The company is sitting on that pile of cash while Buffett waits for an "elephant" - a big company - to buy.

So Berkshire held almost $116 billion in cash and short-term bonds at year end.

In his annual letter to shareholders Saturday, Buffett mixed investment advice with details of how Berkshire's many businesses performed.

Every year, the world's third-richest man pens a much-anticipated letter (pdf) to shareholders of his company, Berkshire Hathaway.

"Prices for decent, but far from spectacular, businesses hit an all-time high", he said.

Business Insider  Andy Kiersz data from Statman and Scheid and Yahoo Finance
Business Insider Andy Kiersz data from Statman and Scheid and Yahoo Finance

"There is simply no telling how far stocks can fall in a short period", Buffett said.

Buffet said that a dearth of "sensible" valuations led it to close nearly no takeovers of companies in 2017, adding that "price seemed nearly irrelevant to an army of optimistic purchasers".

"If Wall Street analysts or board members urge that brand of CEO to consider possible acquisitions, it's a bit like telling your ripening teenager to be sure to have a normal sex life", he wrote.

A major reason for that decline was a $2.22 billion loss from insurance underwriting, Berkshire's first full-year deficit since 2002, hurt by Hurricanes Harvey, Irma and Maria and wildfires in California.

Turning to investments, Berkshire's Apple holding was up to $28.2B at year-end, second only to Wells Fargo at $29.3B.

Buffett says investors shouldn't assume that bonds are less risky than stocks.

Buffett in 2007 bet a founder of the asset management company Protégé Partners LLC $1 million that a Vanguard S&P 500 index fund would outperform several groups of hedge funds over a decade.

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As an added bonus, the turn from the West Coast to the Florida Swing is a reminder that the Masters is just around the corner. McIlroy, amid his own return from injury, is seeking a first victory since the Tour Championship in September 2016.