In this segment from the MarketFoolery podcast, host Chris Hill is joined by Million Dollar Portfolio's Jason Moser and Stock Advisor Canada's Taylor Muckerman to consider one of the investing world's most anticipated annual arrivals: Warren Buffett's letter to Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) shareholders. Every year, the great investor speaks and offers something new. This time around, highlights included the results of Buffett's decade-long bet with other stock-picking "experts," his views on Wells Fargo (WFC +0.95%), the expensiveness of the stock market, and the tax overhaul. They also suggest some ideas for good acquisitions that Buffett might make to spend some of Berkshire's enormous cash hoard.

A full transcript follows the video.

This video was recorded on Feb. 26, 2018.

Chris Hill: We're going to start with what just got so many investing nerds excited Saturday morning, which was the annual release of the Berkshire Hathaway letter. There's a couple of things I want to get to. Jason, I'll start with you. All kidding aside, this is something that, investors of any age would do well to go to berkshirehathaway.com for two reasons. One, because I don't think they've updated that website since 1997.

Taylor Muckerman: [laughs] I was going to say, you might think you came to the archived version of it.

Hill: Yeah, no, it's not the archived version. They have the most basic website imaginable. Two, the collection of annual letters from Buffett and his team are just fantastic. I'm curious of anything in particular stood out to you in this one.

Jason Moser: I've read all of them, and I think your point is very well taken. They do a very good job of making them not redundant. You would think they would be sort of repetitive after a while, but they really keep it fresh every year. I think, with this year's letter, if you read nothing else in the letter, read pages 11 and 12, where he talks about the bet he made back in 2007, where ultimately he was going up against five funds picked from the experts, and he was going to use a cost-free unmanaged S&P Index Fund, basically put that S&P Index Fund against those other five experts, let's let 10 years go by and see which fund performs best.

And to no surprise, I mean, spoiler alert here, the S&P Index Fund was by far and away the best performer, and that's for a number of reasons. But ultimately, he shines a light on the fact that there are real costs and fees that these hedge funds -- the costs that they rake in whether the fund performs, out-performs, under-performs, no matter what, those costs are there. And really, we always talk about this investing for the long haul, taking a long-term approach. We don't say that lightly, that's really how we feel about it. And this was proof that it works. And he closed it out with, "Performance comes, performance goes, fees never falter." I think that really sums it up nicely.

Muckerman: I think one of those funds didn't even make it the full decade, they closed up shop.

Hill: Taylor, anything stand out to you, whether it was from the letter or this morning, he sat down with our friend Becky Quick at CNBC. They covered a whole range of topics. I'm curious if anything caught your attention.

Muckerman: He's feeling good about the tax reform, and everything's expensive out there.

Hill: We'll get to the tax reform in just a second, because what that meant for Berkshire Hathaway --

Muckerman: [laughs] That was a nice little payday.

Hill: -- was even more cash for Buffett's elephant gun.

Muckerman: Seriously.

Hill: We'll get to that in a second. One of the things that came up in the interview this morning that caught my attention was when he was asked about Wells Fargo. I was saying right before we started taping, Jason, Wells Fargo is one of the big four holdings at Berkshire Hathaway. I think it's No. 3 overall. It's up there with IBM, and I don't know if American Express is still in that top --

Muckerman: I think it's still $50 billion, yeah.

Hill: But, he really seems to cut the current management at Wells Fargo a lot of slack when you consider that the current CEO, who hasn't been in the CEO chair that long, was there the whole time when they went through their whole fake accounts scandal.

Moser: Yeah, looking at this, Wells Fargo, according to the letter here, may very well still be the largest holding in value today.

Muckerman: No. 1, yeah.

Moser: And the returns on the investment, it's been basically a three-bagger or so, close to it, at least. That's what makes you think, "Man, these guys are giving them a lot of slack for that." I feel like Wells Fargo just continues to step in it, it seems like, month after month, quarter after quarter. And given that they focus so much on leadership and incentives, it does seem kind of like they're getting kind of a pass on it.

But by the same token, they've been in this investment for a long time, so maybe they see this as a dark period for that holding, but they believe things will get better. I think I've said more than once, we give Wells Fargo a hard time and they deserve it, but I think we're going to look back five years from now and this will probably prove to be a good time to have invested in the bank, because no matter which way you cut it, it's still a very, very large bank that I don't see going away, ever.

Muckerman: And who knows what they're saying to them behind closed doors? Because they're on speed dial, no doubt. So, maybe you don't want to talk too negatively publicly about your No. 1 public stock holding, but I'm sure there's some conversations that have been had and will be had.

Hill: Do you think Sloan looks down at his phone and sees that Buffett is calling? Yeah, he probably picks up.

Muckerman: "Oh no, that's the Omaha zip code there again."

Moser: I tweeted the old #AskWarren thing this morning, I never heard any answers. I was kind of disappointed.

Hill: What was your question? CNBC was doing that this morning, "Send us your questions #AskWarren."

Moser: Yeah. I mean, they took some trader questions, which was kind of killing me. Some Teva question, it was stupid. Anyway, they were talking about the healthcare stuff was, so my question was, as they get the ball rolling helping to reshape our healthcare system, I was wondering if he had a perspective or an opinion on telehealth or virtual healthcare, because we're seeing it more and more becoming a central offering to a lot of healthcare plans, included UnitedHealth Group. And I think Berkshire used to own UnitedHealth Group. They may not anymore. Regardless, given their status in trying to help reshape healthcare, learning more about how he sees technology disrupting it, that would be interesting.

Hill: And that's very well a topic that could come up at the annual meeting in late April, early May, whenever the annual meeting is, when Warren Buffett and Charlie Munger have their marathon six-hour Q&A session.

Before we get to their cash, I want to give a shout out to Huda Mares, who's one of our listeners who we met in San Francisco. She tweeted out highlighting this line from Buffett's letter. "What investors need is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period, or even to look foolish, is also essential."

Muckerman: Hey now!

Hill: Small-f foolish, but --

Muckerman: We know what you meant.

Hill: We feel like we have the simpatico with Buffett. More cash than ever before is at Buffett's disposal, and holy cow, as you indicated, Taylor, he really seems like he's itching to buy something. But he's a value guy at heart, he looks across the market and he doesn't see the bargains that he wants to see. But, come on! Do we really think 2018 is going to end and Berkshire hasn't made an acquisition? I don't know. I feel like --

Moser: Pretty early in the year, I feel like he'll probably find something.

Hill: And it's the amount of money that they have. Don't they have over $100 billion in cash and short-term equivalents?

Moser: Yes.

Hill: Give me -- and when I say "me," I mean Warren. Give Warren Buffett your recommendation. He comes to you and says, "Look, this money is burning a hole in my pocket. I have to buy something."

Moser: [laughs] That's a nice problem to have. I don't know. What do you think, Taylor?

Muckerman: One company I've been looking at quite closely, Waste Connections, it's a Canadian company but it trades in the U.S. after they purchased Progressive Waste Solutions back in 2016. Phenomenal performer, in the same group as Waste Management and Republic Services. They're basically hauling your trash away, your recycling. They also dabble a little bit in exploration production waste on the oil and gas side. They've been a nice acquirer of smaller businesses in the secondary markets that maybe their two larger peers don't really concentrate on. Their returns are phenomenal. Free cash flow generation is through the roof right now. I think they turned almost 16% of revenue last year into free cash flow. Good margins, better returns than their peers.

It's obviously not cheap at the moment, but the multiples have come down over the last few quarters, and it's one that I'm looking at closely. It checks the moat box, the return box, it's very easy to understand. They pick up your trash and they take it to where you can no longer see it and they recycle it. I'm a big fan of this business. It's just been a little pricey for me in the last year or so, but it's coming back down to earth. I like this business a lot.

Hill: What's the ticker?

Muckerman: WCN.

Hill: Jason, what about you?

Moser: I have a couple of ideas really quick. He talked about the four building blocks that add value to Berkshire. Acquisitions served as two of those building blocks. Acquisitions in one way that they can stand on their own, or acquisitions that are maybe bolt-on or complements to businesses they already have.

One that could stand on its own and serve as complementary to holdings they already have, and I've said this probably since I've been here at The Fool, is McCormick. Ticker is MKC. This is the spice king. They generate healthy returns on equity, which is a metric he cares about. Again, I think it's very complementary to what they already have in their Kraft Heinz holding. I mean, hey, you have the ketchup and you have the mustard, you basically get the whole hot dog now. Everything that goes on a hot dog, you basically own that. French's, Frank's, the big acquisition --

Hill: And by the way, as a selling point to Buffett, that line just might seal the deal. Given what we know about Warren Buffett's diet --

Moser: It very well may! [laughs]

Hill: "What if I told you you could have the whole hot dog?"

Moser: "You like hot dogs, don't you? Everybody likes them."

Muckerman: "All the seasoning in your burger, too."

Moser: And, listen, their value proposition, I think, is the best of any public company I've ever seen in that they say their products are responsible for 10% of the cost and yet 90% of the flavor. I mean, that's the most compelling thesis I think I've ever seen. So, for me, I think that McCormick seems like a very Berkshire-like business, where they could buy it and let those guys keep doing what they're doing.

Another one, I think is, Ellie Mae. Very small company, much smaller than McCormick. Ticker is ELLI. But given their exposure to housing, Ellie Mae is known for its Encompass software platform, which basically helps power much of the lending that goes on in the housing market today. I think either one of those companies could serve them very well.

Hill: If they went with Ellie Mae, don't you think they rebrand it Berkshire Hathaway? Because a lot of their acquisitions they just leave alone, but there have been some, particularly in the housing market, where they have rebranded them with Berkshire Hathaway.

Moser: It's certainly possible. It's funny, whenever we talk about Ellie Mae, I think people immediately start thinking Fannie Mae, Freddie Mac, what's the relationship there, Sallie Mae with the student lending. It's certainly one where they could probably rebrand it under the Berkshire Hathaway brand and not lose one bit of the growth in the business.