Billionaire investor Warren Buffett has long been revered for his value investing style, and many investors strive to emulate his success.[0] On Saturday, Buffett released his famous annual letter to shareholders of Berkshire Hathaway (BRK-A, BRK-B), taking on some of his favorite topics in share buybacks, taxes, corporate accounting, and his long-term optimism about the U.S. economy.
Buffett struck a proud, reflective tone in his letter, mapping out plans for his Berkshire shares after he’s gone, and highlighting long-time investment managers Todd Combs and Ted Wechsler role in making equity investments. He extolled the advantages of acquiring stakes in well-run companies and urged shareholders to not focus on book value per share.[1]
Buffett pointed out that Berkshire’s investments in Coca-Cola and American Express, which were made almost 30 years ago, would yield over $1 billion in dividends in 2022.[2] Upon finishing construction of those positions in 1994 and 1995, the yearly dividends paid were only $75 million and $41 million, respectively.[3] In 2021, there were 128 companies in the S&P 500 that earned more than $3 billion in profits — and Berkshire was the largest shareholder in 8 of these businesses: American Express (AXP), Bank of America (BAC), Chevron (CVX), Coca-Cola (KO), HP Inc. (HPQ), Moody’s (MCO), Occidental Petroleum (OXY), and Paramount Global (PARA).[4]
In the letter, Buffett reminded readers that Berkshire had paid $32 billion in corporate taxes over the last 10 years, which was equal to 0.1% of the total federal taxes collected during that period, to show that the company was doing its share.[5] He said that “At Berkshire we hope and expect to pay much more in taxes during the next decade. We owe the country no less: America’s dynamism has made a huge contribution to whatever success Berkshire has achieved — a contribution Berkshire will always need.”[3]
Berkshire posted a loss of $22.82 billion for 2022 and a 54% decline in fourth-quarter income.[6] Operating earnings, which is Buffett’s preferred figure to measure the company’s growth as it is adjusted to remove net capital gains or losses during the year, was $30.79 billion, 12.2% above 2021’s figure.[5]
0. “Invest Like Warren Buffett With These ETFs” Yahoo! Voices, 23 Feb. 2023, https://www.yahoo.com/now/invest-warren-buffett-etfs-130001789.html
1. “Warren Buffett’s letter to shareholders, Berkshire Hathaway’s Q4 earnings (NYSE:BRK.A)” Seeking Alpha, 24 Feb. 2023, https://seekingalpha.com/news/3939312-warren-buffetts-letter-to-shareholders-berkshire-hathaways-q4-results-on-tap
2. “Warren Buffett’s Berkshire Hathaway is the largest investor in these 8 stocks” MarketWatch, 25 Feb. 2023, https://www.marketwatch.com/story/warren-buffets-berkshire-hathaway-is-the-largest-investor-in-these-8-stocks-1eb967c8
3. “Warren Buffett touts key bets, defends taxes, buybacks in annual letter” Markets Insider, 25 Feb. 2023, https://markets.businessinsider.com/news/stocks/warren-buffett-annual-shareholder-letter-coke-amex-buybacks-taxes-earnings-2023-2
4. “Berkshire Hathaway Inc. 2022 Shareholder Letter” Seeking Alpha, 25 Feb. 2023, https://seekingalpha.com/article/4581997-berkshire-hathaway-inc-2022-shareholder-letter
5. “Highlights from Berkshire Hathaway’s annual report and Warren Buffett’s letter By Investing.com” Investing.com, 25 Feb. 2023, https://www.investing.com/news/stock-market-news/highlights-from-berkshire-hathaways-annual-report-and-warren-buffetts-letter-3014640
6. “Warren Buffett Letter To Shareholders: Berkshire Hathaway Posts Losses — But Remains Optimistic” Forbes, 25 Feb. 2023, https://www.forbes.com/sites/tylerroush/2023/02/25/warren-buffett-letter-to-shareholders-berkshire-hathaway-sees-major-losses—but-remains-optimistic/