In emphasising the word “stories” Buffett would appear to be picking up on criticism that last year’s boom in tech stocks was driven by companies with great narratives about their potential success, but little in the way of financial fundamentals.
It’s a valid criticism that will be tested in the coming weeks if bond yields keep rising.
But Buffett’s faintly patronising suggestion that lesser investors can get sucked into the “story” of stocks is ironic in the context of his annual letter, which dedicates two-and-a-half pages, or 1343 words, to telling the folksy origin stories of several Berkshire businesses, including See’s Candies, GEICO and Clayton Holmes.
Indeed, to borrow Buffett’s words, it’s a letter that builds on the myth of Buffett as the ultimate market guru with the ultimate “enticing idea” – you don’t need Wall Street trickery to make oodles of cash but can instead succeed by simply buying good businesses with real market power and good management as cheaply as possible.
Or, as Buffett the master marketer would say: “At Berkshire, we have been serving hamburgers and Coke for 56 years.”
Buffett’s investment strategy has been incredibly successful. But surely even he would concede the “story” he has carefully crafted over generations – through annual letters and annual general meetings and books and documentaries – has also played a role in elevating Berkshire’s value beyond the sum of its parts.
Of course, fundamentals matter more than narratives. But Buffett himself shows both can be important.