In his annual letter, Warren Buffett tells investors to ignore Wall Street pundits

Warren Buffett credited his longtime partner - the late Charlie Munger - with being the architect of the Berkshire Hathaway conglomerate he's received the credit for leading and warned shareholders in his annual letter Saturday not to listen to Wall Street pundits or financial advisors who urge them to trade often.

Buffett said he always writes his letter with smart, long-term investors like his sister Bertie in mind and tries to tell them what he thinks they'd like to know about Berkshire.

"She is sensible - very sensible - instinctively knowing that pundits should always be ignored," Buffett wrote about Bertie. "After all, if she could reliably predict tomorrow's winners, would she freely share her valuable insights and thereby increase competitive buying? That would be like finding gold and then handing a map to the neighbours showing its location."

Buffett told investors that Berkshire is a safe place to park their cash as long as they don't expect the "eye-popping performance" of its past because there are no attractively priced acquisition targets out there big enough to make a meaningful difference in the Omaha, Nebraska-based company's results. But he said Berkshire will be ready to swoop in with its $167.6 billion whenever the casino-like stock market seizes up.

Investor Cole Smead of Smead Capital Management said Buffett is reassuring investors that "we'll be ready to buy things when things finally get rational" while warning about the dangers of Wall Street that "is like a denizen of thieves, and they'll sell you what they can sell you."

Munger, Buffett's longtime investing partner, died in November at age 99 - taking away one of the key sounding boards Buffett relied on over the decades as Berkshire acquired companies like See's Candy, Geico insurance, BNSF railroad and others to reshape the failing textile mill they took over in the 1960s into the massive eclectic conglomerate Berkshire is today.

Buffett already devoted part of last year's annual letter to Berkshire shareholders to a tribute to Munger, but this year's version led off with even more praise for the revered curmudgeon's contributions to Berkshire over the years. Buffett said "Charlie was the 'architect' of the present Berkshire" who realised early on that it was better to buy wonderful businesses at fair prices.

"Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades," Buffett wrote. "In a way his relationship with me was part older brother, part loving father. Even when he knew he was right, he gave me the reins, and when I blundered he never - never - reminded me of my mistake."

Munger's death served as yet another reminder that Berkshire will one day have to move forward without the 93-year-old Buffett at the helm.

Berkshire has established a succession plan and said that Vice Chairman Greg Abel will one day replace Buffett as CEO while the company's two other investment managers will take over the stock portfolio. Abel has already overseen all of Berkshire's many noninsurance businesses since 2018, and managers at those companies say investors shouldn't worry about Abel's ability to lead the company. To a great extent, Berkshire lets its companies run themselves on a day-to-day basis while headquarters decides where to invest all the cash they generate.

Buffett told investors in his letter that Abel "in all respects is ready to be CEO of Berkshire tomorrow."

Edward Jones analyst Jim Shanahan found that comment about Abel comforting, but the question is whether he'll be ready to take advantage of a big opportunity when there is a financial panic because Abel might be afraid that his first big investment would be a dud.

"I have no doubt. given his operational background, that he can step in and run Berkshire today, but I don't know if he's ready to commit a huge amount of capital," Shanahan said.

Buffett also recounted how Berkshire's insurance businesses thrived last year, but its massive utilities and BNSF railroad disappointed. He also told shareholders how he never plans to sell its stakes in nearly 30% of Occidental Petroleum and 9% of five large Japanese trading houses, but he reiterated that he has no plans to buy the oil producer outright.

Berkshire's eclectic mix of businesses, combined with the strong performance of its investments, delivered a profit of $37.57 billion, or $26,043 per Class A share, in the fourth quarter. That's more than double the $18.08 billion profit, or $12,355 per Class A share, that Berkshire reported a year earlier.

But Buffett cautioned that investors should largely ignore those bottom line figures because they are swayed so much by the paper value of its investments. Instead, he has long urged investors to pay attention to Berkshire's operating earnings that exclude investments.

By that measure, Berkshire reported a 28% jump in operating earnings to $8.48 billion, or $5,878.21 per Class A share. That's up from $6.63 billion, or $4,527.06 per Class A share.

The three analysts surveyed by FactSet Research predicted that Berkshire would report quarterly operating earnings of $5,717,17 per Class A share.

Berkshire's stock has set a series of new records in recent weeks, most recently peaking at $632,820 per Class A share Friday morning as investors eagerly anticipated Buffett's letter. Buffett is revered for his remarkably successful track record and the sage advice he has offered over the decades. His annual letter is always one of the best-read reports in the business world.

Berkshire also spent $2.2 billion repurchasing its own shares in the fourth quarter, bringing the total to $9.2 billion for the full year.

But the cash continues to pile up to record levels at Berkshire because Buffett can't find any huge investments at reasonable prices.

One of the biggest acquisitions Berkshire did make recently was the purchase of the last 20% of the Pilot truck stop business it hadn't already bought as part of a 2017 deal. But that transaction with the Haslam family got messy last year with both Berkshire and the Haslams accusing each other of trying to manipulate Pilot's earnings to affect the price Berkshire had to pay.

The duelling lawsuits over that deal generated headlines with bribery allegations and other alleged misdeeds before being settled in January. Berkshire completed the purchase of the nation's largest truck stop operator last month for only $2.6 billion.

Buffett didn't directly comment on that deal, but he may have been hinting at it when he recounted classic advice from 1863 urging all banks to "never deal with a rascal" that he said he's learned the wisdom of over the years.

"People are not that easy to read," Buffett said. "Sincerity and empathy can easily be faked. That is as true now as it was in 1863."