8 key quotes from Warren Buffett’s famous annual letter

Warren Buffett and Berkshire Hathaway both released annual letters over the weekend. Surprisingly, his letter was only nine pages – the shortest since the 70s. Nevertheless, there are plenty of takeaways and valuable insights, and here are the ones that I found most interesting.

It only takes a few good ones: "Our satisfactory results have been the product of about a dozen truly good decisions – that would be about one every five years ... Over time, it takes just a few winners to work wonders ...Consequently, our extensive collective of businesses currently consists of a few enterprises that have truly extraordinary economics, many that enjoy very good economic characteristics and a large group that are marginal.”

Let your winners run: “In August 1994 … Berkshire completed its seven-year purchase of 400 million shares of Coca-Cola we now own. The total cost was $1.3 billion – then a very meaningful sum at Berkshire. The cash dividend we received from Coke in 1994 was $75 million. By 2022, the dividend had increased to $704 million. Growth occurred every year, just as certain as birthdays.”

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.”

Earnings beats are overrated: “Even the operating earnings figure that we favour can easily be manipulated by managers who wish to do so … Beating “expectations” is heralded as a managerial triumph. That activity is disgusting. It requires no talent to manipulate numbers. Only a deep desire to deceive is required. “Bold imaginative accounting,” as a CEO once described his deception to me, has become one of the shames of capitalism.”

Buybacks adding value: “The math isn’t complicated: When the share count goes down, your interest in our many businesses goes up. Every small bit helps if repurchases are made at value-accretive prices. Just as surely, when a company overpays for repurchases, the continuing shareholders lose. At such times, gains flow only to the selling shareholders and to the friendly, but expensive, investment banker who recommended the foolish purchases.”

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 behaviour 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.” 

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