Warren Buffett, the world’s 4th or 5th richest person, famously writes a Letter to Shareholders each year published around the end of February and featured in May at his annual meeting for shareholders on a farm in Omaha, Nebraska. His company, Berkshire Hathaway, has an amazing long-term record of rewarding long-term shareholders. Buffett is now 92½ years old and nearing his 60th annual go-around with the meeting and shareholder letter.
The letter has a mild cult following and is read by seasoned, experienced investors; younger, newer investors; company CEOs; and anyone who has a few extra minutes for down-to-earth reflections from a billionaire. This year’s letter was far shorter than past years – and thus to the point. Here are a few of the highlights:
- If you want to make fewer mistakes, make fewer decisions. He says major investing mistakes are avoided by simplifying the decision-making process and reducing the number of decisions. He cites about a dozen decisions [over nearly 60 years] contributing to his company’s satisfactory results.*
- Stock buybacks are not all bad. Buffett makes a strong case for stock buybacks.
- The stock market is a yo-yo but businesses are not.** Individual stocks and stock prices are often more volatile than the companies they represent. Not getting caught up in stock prices can level out the journey of owning an investment.
- The stock market is the perfect place for patience. Speaking of patience, Warren Buffett’s Berkshire Hathaway company stock was UP 4% in 2022 versus the S&P 500 being down 18% including dividends.
- Focus on what matters most. Buffett emphasizes focusing on company fundamentals over stock price, especially in the short- and intermediate-term. He emphasizes being a long-term investor and not a short-term stock-picker.
- Refrain from using leverage. One of Buffett’s all-time mantras. He reminds investors that buying stock on borrowed money multiplies the potential losses, whereas buying stock on a cash basis more clearly defines the amount of money at risk.
*Letter to Shareholders
**Jason Zweig. WSJ.com, March 7, 2023.