Warren Buffett released the annual Berkshire Hathaway shareholder letter over the weekend—reporting a loss and taking on critics of stock buybacks.
Key Details
- Berkshire Hathaway released its highly anticipated annual shareholder letter on Saturday, February 25, discussing the state of the firm, its partners, its tax payments, and investment strategies.
- Last year was a tough one for Berkshire Hathaway, with a 54% decline in fourth-quarter income.
- The company posted $22.8 billion in losses, but Buffett expects the company’s gains to be “meaningfully positive in future decades,” adding the fourth-quarter losses—which are “regularly and mindlessly headlined by media”—effectively and “totally misinform investors.”
- Berkshire announced that it repurchased $2.6 billion of its own stock during the fourth quarter, increasing its full-year buybacks to $7.9 billion.
Why It’s News
The letter is a six-decade tradition, released before the company’s annual May meeting in Omaha, Nebraska. The tone of the letter is folksy and direct—with insightful and memorable advice peppered throughout.
Warren Buffett, the 92-year-old CEO and acclaimed investor, used the letter to push back against public criticism of stock buybacks, which have been a recent talking point for President Joe Biden.
Backing Up A Bit
President Biden has been a vocal critic of the practice of stock buybacks, going as far as to add a 1% excise tax signed into law by the Inflation Reduction Act. During his State of the Union address, he advocated bumping the tax to 4% after the initial tax proved unable to slow buybacks down earlier this year.
As we previously reported, Meta Platforms announced a $40-billion stock buyback on February 1 during its fourth-quarter earnings report. Apple similarly bought $90 billion in shares in early 2022. Chevron is working to buy $75 billion in shares over five years.
Critics of stock buybacks note that stock buybacks benefit corporations at the expense of money that could be invested into growing companies, creating jobs, and expanding pay and benefits.
Alternative Perspective
Buffett defended the practice, saying that they benefit shareholders. He’s praised previous efforts from other companies, such as Apple’s buybacks that have increased the company’s control over its revenue. Berkshire Hathaway initiated a $27 billion stock buyback in 2021, CNBC notes.
“When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive),” writes Buffett.
Key Takeaways
Last year was a tough one for Berkshire Hathaway, with a 54% decline in fourth-quarter income. Buffett dismissed the losses as irrelevant, being overly hyped by the media. “Berkshire had a good year in 2022,” he says, pointing to the company’s overall earnings growth of $30.8 billion and total revenue of $302.1 billion, Forbes notes.
“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,” says Buffett.
Barron’s Andrew Bary was less enthused by this year’s letter, declaring it disappointing and saying it didn’t offer much insight into Buffett’s thought process behind key issues—notable with Geico, succession, and the slowdown in stock buybacks.
