Annual Letter Report 2025

Charlie Munger used to say that the world rarely rewards complexity as much as it rewards discipline. Markets change, technologies evolve, and economic forecasts swing wildly, but the basic principles of sound investing remain remarkably stable.

In 2025, our investment once again benefited from those principles.

During the past year, global markets experienced their usual share of excitement. Inflation debates continued, interest rates moved unpredictably, and geopolitical headlines occasionally rattled investors. Yet despite all this noise, many good businesses simply kept doing what good businesses do: serving customers, generating cash, and steadily increasing their intrinsic value.

Our job is simply to identify those businesses and stay with them.

The Performance of Our Businesses

Our operating companies produced solid results in 2025. Some segments performed exceptionally well, while others faced temporary challenges. That is the nature of a diversified collection of businesses.

Importantly, we measure success not by quarterly earnings surprises but by long-term growth in earning power.

Over decades, the compounding of retained earnings has become the most powerful force in finance. A business that earns high returns on capital and reinvests intelligently can quietly build extraordinary value for shareholders.

The lesson is simple: time is the friend of a wonderful business and the enemy of a mediocre one.

Market Volatility: A Feature, Not a Bug and Opportunity

Many investors continue to fear market volatility. We do not share that concern. Though 2025 was a year of rapid growth in AI valuation and investment, uncertain geopolitics with the coming leadership of Donald Trump in the US. However, we expect that in uncertain times, we will wait and find those businesses that are valuable and growing. 

Imagine owning a farm. If someone offers to buy your farm every day at a different price—sometimes high, sometimes low—you would not let those offers determine the value of your farm. You would instead focus on how much corn the farm produces.

Stocks should be viewed the same way.

The market exists to serve you, not to instruct you.

When prices fall significantly while business fundamentals remain strong, long-term investors are given opportunities. When prices become overly optimistic, patience becomes the best strategy.

In other words, volatility is the price investors pay for superior long-term returns.

Capital Allocation

Running a business well is important. But allocating capital wisely may be even more important.

In 2025, we deployed capital in three primary ways :

1. Consumer Product and Retail Business in Vietnam

Vietnam's economy is growing rapidly in the coming decade, supported by a young, educated, and large population, plus the reform policies of the government to focus on the private business sector, and determination for a new era of expansion in tourism and high-value product industries. The country is growing like China was 10 or 15 years ago, with the outcome of rising income and quality of life, and with all those reasons, we think that our business will grow at a reasonable rate in the long term.

2. Technology and Software Business in North America

We continue to look for technology businesses in the US with durable competitive advantages, honest and capable management, and predictable earnings power. Our preference remains simple: buy great businesses at fair prices rather than fair businesses at great prices. The main reason is very simple: We believe technology is the main growth factor in the US economy, but we are very careful in evaluating and valuing the businesses themselves.

3. Luxury and fintech business in Europe 

We have invested in these businesses since 2024, and we are looking forward to staying in the business for a long time to come. The luxury business has been undervalued after the rapid growth and rising interest rates due to high inflation. However, we view the business as a long-term productive asset, as it can raise its price and offer desirable products even though the business had declined during the time due to some macro reasons and mismanagement before that. In 2025, we see a change in leadership, and we are expecting the business to come back with a new cycle, as always.

Last but not least, the fintech business is a growing sector with high demand from customers all over the world. We believe the business will continue to grow with the expansion into more markets; the stake is not high, though we would like to have skin in the game, and the valuation was very reasonable, with low risk and likely high return. 

Maintaining Liquidity

Holding cash is sometimes criticized, particularly during strong markets. But financial flexibility allows us to act decisively when opportunities appear. The best investment opportunities often emerge during periods of fear and uncertainty.

Cash, therefore, is not a burden—it is optionality.

Our Managers

One of the greatest advantages of our organization is the quality of the managers who run our operating businesses.

These individuals are not motivated by bureaucracy or corporate politics. Instead, they focus on serving customers, building strong teams, and increasing the long-term value of their businesses.

Most importantly, they treat shareholder capital with the same care they would apply to their own money.

That mindset is priceless.

Lessons for us to always remember

Every year, many readers ask what lessons can be drawn from our approach. While markets evolve, a few principles remain timeless:

1. Invest in businesses you understand.

Complexity may sound impressive, but clarity produces better decisions.

2. Avoid excessive debt.

Leverage can magnify gains, but it can also destroy otherwise sound businesses.

3. Think in decades, not quarters.

Compounding works best when given sufficient time.

4. Ignore market noise.

The opinions of others do not determine intrinsic value.

5. Focus on productive assets.

Over time, businesses that produce goods and services will generate wealth for their owners.

Looking Ahead

Predicting the short-term direction of markets has never been our business, and it never will be.

We do not know where interest rates will be next year. We do not know how stock markets will perform next month. And we certainly do not claim to know what economists will predict next week.

What we do know is this:

Human ingenuity continues to create new opportunities; productive businesses continue to grow; and disciplined, patient investors are likely to be rewarded.

Our commitment to you remains unchanged.

We will continue to:

• Invest with discipline
• Maintain financial strength
• Seek durable businesses
• Think long term

If we do those things well, the results will take care of themselves.