Warren Buffett released his annual letter to shareholders of Berkshire Hathaway (BRK-B) Saturday morning. Every year it is one of the most widely read documents in the business world for the smart, funny and sometimes controversial insights from the Oracle of Omaha. Here are the seven things everyone will be talking about from this year’s letter:

(1) Berkshire had a good 2015, despite what the stock did

In a flat 2015 market, Berkshire fell about 12%, its worst decline since 2008. Buffett focused on the company’s 6.4% gain in book value -- the financial metric that he’s always used as an indicator of his conglomerate’s progress. Even though this was below the 13% average book value gain since the recession, it outpaced the 1.4% gain in the S&P including dividends.

Buffett reiterated his previous assertion that Berkshire will repurchase stock if the value of Berkshire trades at or below 1.2x book. Currently it is trading at about 1.3x book, which perhaps limits downside of the shares.

Owned businesses

Berkshire now owns 10 ¼ companies outright (including the 27% Kraft Heinz stake) that would be listed on the Fortune 500 were they independent.

“That leaves just under 98% of America’s business giants that have yet to call us. Operators are standing by."

Berkshire’s large insurance operations -- which earned $4.9 billion in 2015 versus $5.2 billion in 2014 -- put some downward pressure on results. However, an increase in “float” to $88 billion in these businesses can allow the company to fund investments. Buffett reminded investors why insurance has been good for Berkshire over the five decades he’s run the company.

In 2015, all of Berkshire’s other businesses -- including a railroad, utilities and energy, financial products, manufacturing and retail -- were more profitable than the previous year.

Buffett highlighted the turnaround in the company’s biggest non-insurance business, BNSF railroad, which improved its service to customers after $5.8 billion of capital spending.

Together with BNSF, the "Powerhouse Five" -- which includes Berkshire's five most profitable non-insurance businesses -- earned $13.1 billion in 2015. The acquisition of aerospace industry supplier Precision Castparts that closed in January will make the group the “Powerhouse Six.”

As for more M&A ahead? This year, Buffett didn't specifically hint at any elephant-sized deals on the horizon. Instead, he discussed successful "bolt-on acquisitions" and also reiterated that partnership opportuniites--including with 3G capital with whom he teamed up with in the 2013 purchase of Heinz--would continue. Buffett said that he will only pursue a friendly takeover, even if hostile deals may sometimes be justified for other investors. At Berkshire, “we go only where we are welcome.”

Public investments

Some investors have criticized Buffett’s commitment to major stock holdings, including American Express (AXP) and IBM (IBM). These two, which were down 26% and 14% in 2015, along with Coca-Cola (KO) and Wells Fargo (WFC), make up his “Big Four” investments. But Berkshire was not a seller of those stocks, so no realized losses hit the company’s bottom line. He reiterated his confidence in the investments:



“At Berkshire, we much prefer owning a non-controlling but substantial portion of a wonderful company to owning 100% of a so-so business. It’s better to have a partial interest in the Hope Diamond than to own all of a rhinestone.”



(2) The presidential candidates are “dead wrong” about the economy



Don’t look for any mentions about oil, China, foreign currency excange rates, or monetary policy in the Berkshire letter-- you won't find them.



But Buffett did emphasize that the domestic economy is strong, despite what politicians contend. He is typically upbeat on the long-term prospects of the U.S. economy. And this year is no different, as the ultimate value investor highlighted “generational opportunities.”



“It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves to. That view is dead wrong: The babies being born in America today are the luckiest crop in history."



American GDP per capita is now about $56,000 -- six times the amount in 1930 (the year Buffett was born) in real terms. “America’s economic magic remains alive and well."



(3) Climate change is a risk



Buffett said the insurance business would not be affected by climate change in the near term. However, he believes even a small threat to our environment should be met with action.



“If there is only a 1% chance the planet is heading toward a truly major disaster and delay means passing a point of no return, inaction now is foolhardy. Call this Noah’s Law: If an ark may be essential for survival, begin building it today, no matter how cloudless the skies appear.”



(4) A major attack is a “clear, present and enduring danger”



“There is, however, one clear, present and enduring danger to Berkshire against which Charlie and I are powerless. That threat to Berkshire is also the major threat our citizenry faces: a 'successful' (as defined by the aggressor) cyber, biological, nuclear or chemical attack on the United States.”













































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