The Berkshire Annual Letter

Even though Warren Buffett has come to personify fundamental analysis and I'm more of a technical analysis kind of guy, how can one not go gaga over this kind of fundamental analysis (emphasis mine)?

Long ago, Charlie [Munger] laid out his strongest ambition: “All I want to know is where I’m going to die, so I’ll never go there.” That bit of wisdom was inspired by Jacobi, the great Prussian mathematician, who counseled “Invert, always invert” as an aid to solving difficult problems. (I can report as well that this inversion approach works on a less lofty level: Sing a country song in reverse, and you will quickly recover your car, house and wife.)

[...]

Charlie and I avoid businesses whose futures we can’t evaluate, no matter how exciting their

products may be. In the past, it required no brilliance for people to foresee the fabulous growth

that awaited such industries as autos (in 1910), aircraft (in 1930) and television sets (in 1950). But

the future then also included competitive dynamics that would decimate almost all of the

companies entering those industries. Even the survivors tended to come away bleeding.

Just because Charlie and I can clearly see dramatic growth ahead for an industry does not mean

we can judge what its profit margins and returns on capital will be as a host of competitors battle

for supremacy. At Berkshire we will stick with businesses whose profit picture for decades to

come seems reasonably predictable. Even then, we will make plenty of mistakes.

We will never become dependent on the kindness of strangers. Too-big-to-fail is not a fallback

position at Berkshire. Instead, we will always arrange our affairs so that any requirements for cash

we may conceivably have will be dwarfed by our own liquidity. Moreover, that liquidity will be

constantly refreshed by a gusher of earnings from our many and diverse businesses.

When the financial system went into cardiac arrest in September 2008, Berkshire was a supplier

of liquidity and capital to the system, not a supplicant. At the very peak of the crisis, we poured

$15.5 billion into a business world that could otherwise look only to the federal government for

help. Of that, $9 billion went to bolster capital at three highly-regarded and previously-secure

American businesses that needed – without delay – our tangible vote of confidence. [...]

The $20 billion-plus of cash equivalent

assets that we customarily hold is earning a pittance at present. But we sleep well.