Warren Buffett’s annual letter to shareholders of Berkshire Hathaway Inc. (NYSE: BRK-A) starts the way they all start, with the company’s gain in net worth for the year just passed and a statement about how well the stock has performed since Buffett took ownership 53 years ago.

Then he acknowledges that just $36 billion of the company’s net gain of $65.3 billion in 2017 was the result of anything Berkshire Hathaway did. The rest — $29 billion — is the result of the December change to U.S. tax law. Buffett says that change will “swamp the truly important numbers that describe our operating performance. For analytical purposes, Berkshire’s ‘bottom-line’ will be useless.”

The company made just one sizable acquisition last year, a 38.6% stake in Pilot Flying J travel centers. Buffett noted some bolt-on acquisitions as well: Berkshire-owned Clayton Homes acquired two homebuilders; the company’s floor-covering business, Shaw Industries, acquired a distributor of luxury vinyl tile; and Berkshire’s HomeServices real-estate business added 12,300 agents to its stable through three acquisitions.

Berkshire Hathaway’s insurance business took a $3.2 billion pretax loss last year, primarily due to the impact of hurricanes Harvey, Irma and Maria.

Excluding the company’s stake in Kraft Heinz Co. (NYSE: KHC), its top five holdings at the end of last year were as follows:

• American Express Co. (NYSE: AXP): a 17.6% stake valued at $15 billion with a cost basis of $1.3 billion
• Phillips 66 Co. (NYSE: PSX): a 14.9% stake valued at $7.5 billion and a cost basis of $5.8 billion
• Moody’s Corp. (NYSE: MCO): a 12.9% stake valued at $3.6 billion with a cost basis of $248 million
• Wells Fargo & Co. (NYSE: WFC): a 9.9% stake valued at $29.3 billion and a cost basis of $11.8 billion
• Coca-Cola Co. (NYSE: KO): a 9.4% stake valued at $18.4 billion with a cost basis of $1.2 billion

The following are a few of Buffett’s comments from the letter.

Regarding acquisitions:

Once a CEO hungers for a deal, he or she will never lack for forecasts that justify the purchase.

Regarding debt:

Our aversion to leverage has dampened our returns over the years. But Charlie [Munger] and I sleep well.

Regarding Berkshire’s war chest:

At yearend Berkshire held $116.0 billion in cash and U.S. Treasury Bills (whose average maturity was 88 days), up from $86.4 billion at yearend 2016. This extraordinary liquidity earns only a pittance and is far beyond the level Charlie and I wish Berkshire to have. Our smiles will broaden when we have redeployed Berkshire’s excess funds into more productive assets.

On investing in American assets:

Almost 90% of our investments are made in the United States. America’s economic soil remains fertile. …

In America, equity investors have the wind at their back.

There is, of course, much more, including a report on the outcome of 10-year bet Buffett made with investment advisory firm Protégé Partners. The full letter is available at the Berkshire Hathaway website.

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