Over the weekend on Saturday morning, amid its usual fanfare and attention, Warren Buffett's company Berkshire Hathaway released its annual report to the public.
This is a pretty big deal each year. Investors and financial reporters typically wait with baited breath to hear what the Oracle himself has to say in his legendary annual letter.
Buffett's topics in previous letters have covered a lot of ground– the state of the US economy, value investing education, why Wall Street is so deeply flawed, commentary on financial markets, etc.
This year's letter was, as usual, quite interesting… but primarily because of what Buffett said about his own business.
Berkshire Hathaway is an enormous enterprise; it's essentially a $500 billion holding company that owns dozens of smaller businesses, all of which collectively generate tens of billions in free cash flow.
Buffett's primary mission is to acquire more businesses and expand Berkshire's portfolio… and then ensure that each of those subsidiaries has top quality management to grow the cashflow.
And that's what was so interesting about this year's letter: Buffett couldn't really do his job.
According to Warren Buffett himself:
In our search for new stand-alone businesses, the key qualities we seek are durable competitive strengths; able and high-grade management; good returns on the net tangible assets required to operate the business; opportunities for internal growth at attractive returns; and, finally, a sensible purchase price.
That last requirement proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all-time high.