Warren Buffett published his 2022 annual letter to Berkshire Hathaway (BRK.A -0.67%) (BRK.B -0.70%) shareholders on Saturday.  And like most of his letters, the contents contained a medley of wry jokes, homespun yet poignant wisdom, blunt criticisms, and gratitude.

Buffett's letters are a rich source of information for new and veteran investors alike. And while, as usual, he addresses the current market dynamics, he also reminds us of the big picture and the power of long-term investing. 

With the stock market's 2023 rally faltering, investors can take some direction from Buffett's words. Here are some key takeaways from the letter that may help you filter out the noise and focus on what matters most in this turbulent market.

Berkshire Hathaway CEO Warren Buffett.

Image Source: The Motley Fool

The market is inefficient

Buffett's approach to the stock market is centered around investing in quality businesses at discounts to their intrinsic values to unlock strong returns over time. He often criticizes the market's short-term gyrations, both to the upside and the downside. Here's a relevant quote from the 2022 shareholder letter:

One advantage of our publicly traded segment is that -- episodically -- it becomes easy to buy pieces of wonderful businesses at wonderful prices. It's crucial to understand that stocks often trade at truly foolish prices, both high and low. "Efficient" markets exist only in textbooks. In truth, marketable stocks and bonds are baffling; their behavior usually understandable only in retrospect.

Buffett's early approach to the market was based on the teachings of Ben Graham at Columbia Business School. Buffett's mentor took advantage of market inefficiencies by discovering companies trading for less than they were worth and investing in them. However, as Buffett scaled Berkshire Hathaway and access to business information became widespread, Buffett pivoted toward an approach centered around buying quality businesses and building a portfolio of core holdings instead of simply buying shares just because they were temporarily cheap. 

When Buffett says the market is inefficient, he is talking about both the short-term price swings that can lead to discounts and the market's inability to forecast what a company could become. When combined, these two inefficiencies create plenty of opportunities for long-term investors.

In the 2022 shareholder letter, Buffett outlined a few key examples of core holdings in Berkshire's portfolio, such as Coca-Cola (KO 0.17%) and American Express (AXP -0.83%). The dividends Coke now pays to Berkshire Hathaway annually are equal to nearly half of what Berkshire Hathaway paid for its stock position, while its yearly dividend payout from American Express is around a quarter of the conglomerate's investment in the financial giant. "The lesson for investors: The weeds wither away in significance as the flowers bloom," said Buffett. "Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well."

The first part of the lesson is that fear and greed can lead to discounted or inflated prices in the short term. But the more helpful kernel of advice is that investors should emphasize identifying businesses that can consistently grow for years. In this vein, it mattered less if Berkshire Hathaway bought American Express for $5 a share or $10 a share in 1995, so long as it kept holding the stock through its periods of volatility.

Never bet against the United States

Buffett is a proud American who believes in the future of the U.S. economy. In the shareholder letter, he credits the strength of the U.S. economy as a primary reason for his success:

National Indemnity became available in 1967, and we shifted our resources toward insurance and other non-textile operations. Thus began our journey to 2023, a bumpy road involving a combination of continuous savings by our owners (that is, by their retaining earnings), the power of compounding, our avoidance of major mistakes and -- most important of all -- the American Tailwind. America would have done fine without Berkshire. The reverse is not true.

My favorite portion of the letter is when Buffett casually reminds his shareholders that he has been investing for a staggering 80 years, a period that included the post-World War II boom, several wars (and the prolonged Cold War), the runaway inflation of the 1970s, multiple recessions during the 1980s, the rise of the personal computer, the dot-com bust, the Great Recession, the COVID-19 pandemic, and more. Yet through it all, Buffett has made it a point never to bet against the U.S.

America's dynamism has made a huge contribution to whatever success Berkshire has achieved -- a contribution Berkshire will always need. We count on the American Tailwind and, though it has been becalmed from time to time, its propelling force has always returned. I have been investing for 80 years -- more than one-third of our country's lifetime. Despite our citizens' penchant -- almost enthusiasm -- for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America. And I doubt very much that any reader of this letter will have a different experience in the future.

Cautiously optimistic

Buffett will be 93 years old this summer, so it's no surprise that his key points mainly expand upon his core principles. Yet his ongoing belief in inefficient markets and the American tailwind should reassure investors dealing with today's high volatility, inflation, rising interest rates, global competition, and geopolitical tensions.

The last 25 to 30 years offered myriad moments when Buffett could have second-guessed his investments in American Express or Coca-Cola. Both stocks have undergone several significant periods of decline. In the last 15 years alone, Coca-Cola endured a 47.2% drop in value, while American Express suffered an 83.9% plunge from its peak at one point. Selling those positions would have been a big mistake, though, as both stocks now trade less than 13% below their all-time highs and have grown several-fold since those drawdowns. 

In sum, the best path forward is to avoid the fool's errand of attempting to forecast what the stock market will do in 2023, and focus instead on quality businesses that offer good value relative to their multidecade potential -- trusting that their investment theses will play out over time in lockstep with the growth of the U.S. economy.