Warren Buffett’s Message to Investors

Warren Buffett’s annual letter to investors is out.

Here are some key points and quotes from the letter that was only nine pages, the shortest since the 70s. :

  • He reiterated his focus on operating earnings rather than capital gains.
  • He urged investors to stay focused on the long term instead of high inflation
  • Berkshire Hathaway reported a record operating profit for 2022 of $30.8 Billion, despite a net income loss of $22.8B due to the bear market capital movements.
  • GEICO, the company’s main insurance business, posted a $90 million loss for the year, but Q4 marked a gain of $234 million.
  • In the letter, Buffett discussed the company’s progress, his preference for operating earnings, and his optimism for the future.
  • Buffett also stressed the importance of strong management, shared his thoughts on succession planning, and discussed his criteria for investing in companies.
  • He also highlighted the potential of Berkshire Hathaway’s energy businesses.
  • The company bought back $7.8 billion worth of stock in 2022, or about 1.2% of the market cap. Believes that all investors benefit from share buybacks as long as they are made at the right prices.
  • At yearend 2022, Berkshire was the largest owner of eight of these giants: American Express, Bank of America, Chevron, Coca-Cola, HP Inc., Moody’s, Occidental Petroleum, and Paramount Global.
  • He also discussed the challenge of investing in volatile markets, emphasizing the need for discipline and patience, and he explained why he thinks it is still possible to find great companies to invest in.
  • Buffett also spent a section of the letter pointing out that Berkshire paid $32 billion in corporate taxes in the decade ending 2021, amounting to .1% of all federal taxes collected in that period, as a reminder that Berkshire is doing its part.

Key Quotes

  • Start early, live long: “The lesson for investors: The weeds wither away in significance as the flowers bloom. 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.”
  • Inefficient markets and benefit of public markets: “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.”
  • Berkshire’s future: “As for the future, Berkshire will always hold a boatload of cash and U.S. Treasury bills along with a wide array of businesses. We will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses … At Berkshire, there will be no finish line.”

Quoted from a post by: John Haslett, CA(SA), FRM

Chief Operations Officer and Portfolio Manager at Graphite Asset Advisory