Warren Buffett released his latest annual shareholder letter for Berkshire Hathaway on Saturday. Berkshire Hathaway’s chairman and CEO said he would continue to bet on America even after reporting corporate earnings that fell in the fourth quarter. Greater inflationary pressure weighed on the company’s various activities. Meanwhile, buyback activity slowed during the year as Berkshire closed some notable deals in 2022, such as the $11.6 billion acquisition of non-life insurance company Alleghany, its largest since 2016. The billionaire investor remained optimistic about future investment activity, boosting his holdings in U.S. companies such as American Express, Coca-Cola and Paramount Global – each of which Berkshire is the largest owner. “I have been investing for 80 years – more than a third of our country’s lifespan. 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.” wrote Buffett in his letter. “And I highly doubt that any reader of this letter will have a different experience in the future.” Here are more highlights from the highly anticipated letter. “Business pickers,” not stock pickers “Our goal in both forms of ownership is to make meaningful investments in companies with both long-standing favorable economic characteristics and reliable managers. In particular, keep in mind that we own publicly traded stocks based on our expectations about their long-term business performance, not because we see them as vehicles for nimble buying and selling. That point is crucial: Charlie and I are not stock pickers; we are business pickers.” On his acquisition of insurance company Alleghany “A second positive development for Berkshire last year was our acquisition of Alleghany Corporation, a non-life insurance company led by Joe Brandon. I have worked with Joe in the past and he understands both Berkshire and insurance. Alleghany offers us special value because Berkshire’s unparalleled financial strength enables its insurance subsidiaries to pursue valuable and sustainable investment strategies unavailable to virtually all competitors.Helped by Alleghany, our insurance market will grow from $147 billion to $164 billion by 2022. With disciplined underwriting, these funds have a decent chance of being cost-free over time. Since purchasing our first non-life insurer in 1967, Berkshire’s float has grown 8,000 times through acquisitions, operations and innovations.” Largest owner in eight U.S. firms – including Paramo At the end of 2022, Berkshire was the majority owner of eight of these giants: American Express, Bank of America, Chevron, Coca-Cola, HP Inc., Moody’s, Occidental Petroleum and Paramount Global. ” No reason to make a long-term bet against America “I’ve been investing for 80 years – more than a third of our country’s lifespan. 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 very much doubt that any future reader of this letter will have a different experience.” Buffett’s Willingness to Pay Taxes “At Berkshire, we hope and expect to pay much more tax in the next decade. We owe the country no less: America’s dynamism has been a huge contributor to the success Berkshire has achieved – a contribution which Berkshire will always need.” We rely on the American Tailwind and although it has been calm from time to time, its propulsion has always returned.’ ‘Disgusting’ manipulation of results “Finally, an important warning: even the operating profit figure that we favor can be easily manipulated by managers who want to. Such manipulation is often considered sophisticated by CEOs, directors and their advisors. considered. Reporters and analysts also embrace its existence. Beating “expectations” is heralded as a management triumph. That activity is disgusting. It takes no talent to manipulate numbers: there is only a deep desire to deceive required. described his deceit to me, has become one of the disgrace of capitalism.” Buffett Defends Share Repurchases “It should be emphasized that profits from value-enhancing repurchases benefit all owners – in every way. Imagine, if you will, three fully informed shareholders of a local car dealership, one of whom owns the company Imagine. , furthermore, that one of the passive owners wants to sell its interest back to the company at a price that is attractive to the two remaining shareholders. Upon completion, did this transaction harm anyone? somehow favored over the remaining passive owners? Hurt the public? If you are told that all buybacks are detrimental to shareholders or the country, or especially beneficial to CEOs, you are listening to an economically illiterate or a silver-tongued demagogue (characters that are not mutually exclusive).” Buffett: “There’s nothing like having a great partner” “There’s nothing like having a great partner. Charlie and I think about the same thing. But what I need a page to explain, he summarizes in a Moreover, his version is always more clearly reasoned and also more artfully – some might add bluntly – worded.Here are a few of his thoughts, many of which are from a very recent podcast: • The world is full of foolish gamblers, and they will not doing as well as the patient investor • If you don’t see the world as it is, it’s like judging something through a distorted lens • I just want to know where I’ll die, so I’ll never go there. a related thought: Write your desired obituary in the beginning – and act accordingly • If you don’t care whether you are rational or not, don’t work at it, you will remain irrational and you will get bad results • Patience can become and learned A long attention span and the ability to concentrate on one thing for a long time is a huge advantage. You can learn a lot from dead people. Read about the deceased you admire and loathe. • Don’t leave in a sinking boat if you can swim to a seaworthy boat. • A great company keeps working after you don’t; a mediocre company doesn’t do that. • Warren and I don’t focus on the froth of the market. We look for good long-term investments and stubbornly hold onto them for a long time. • Ben Graham said, “The stock market is a voting machine day to day; in the long run it is a weighing machine.” If you keep making something more valuable, a wise person will notice and start buying. • There is no such thing as 100% security in investing. So using leverage is dangerous. A series of beautiful numbers times zero will always equal zero. Don’t count on getting rich twice. • However, you don’t need to own a lot of things to get rich. • You have to keep learning if you want to become a good investor. When the world changes, you must change. • Warren and I hated railroad stocks for decades, but the world changed and eventually the country had four massive railroads that were vital to the American economy. We were slow to recognize the change, but better late than never. • Finally, I’d like to add two short sentences from Charlie that have shaped his decisions for decades: “Warren, think about it. You’re smart and I’m right.’ And so it goes. I never have a phone call with Charlie without learning something. And while he makes me think, he also makes me laugh. * * * * * * * * * * * * I’ll add a rule of my own to Charlie’s list: Find a really smart, high-quality partner – preferably a little older than you – and then listen very carefully to what he says. America would have “done just fine” without Berkshire.” In 1965, Berkshire was a one-trick pony, the owner of a venerable – but doomed – New England textile company. With that company on a death march, Berkshire needed an immediate fresh start. Looking back, I was slow to appreciate the seriousness of the problems, and then a stroke of luck came: National Indemnity became available in 1967, and we shifted our resources to insurance and other non-textile activities, thus beginning our journey to 2023, a bumpy road with a combination of continuous savings by our owners (that is, by retaining their profits), the power of compounding, our avoidance of major mistakes, and – most importantly – the American Tailwind America would have done just fine without Berkshire. the reverse is not true.”
Highlights from Warren Buffett’s annual letter to shareholders