Warren Buffett published his famous annual letter to Berkshire Hathaway shareholders on Saturday.
The billionaire investor touted his lucrative, decades-long bets on Coca-Cola and American Express.
Buffett defended Berkshire’s stock buybacks and tax payments, and trashed manipulated earnings.
Warren Buffett struck a proud, reflective tone in his annual letter to Berkshire Hathaway shareholders, published on Saturday.
The famed investor and Berkshire CEO highlighted the best bets of his career, defended his conglomerate’s stock buybacks and tax contributions, and slammed managers who manipulate their companies’ earnings to meet Wall Street’s expectations.
“Our satisfactory results have been the product of about a dozen truly good decisions — that would be about one every five years,” Buffett said.
The billionaire executive pointed to Berkshire’s stakes in Coca-Cola and American Express, two cornerstones of his roughly $300 billion stock portfolio. Buffett’s company originally invested $1.3 billion in the soda giant for a position worth $25 billion at the end of last year. It piled another $1.3 billion into the credit-card titan for a stake worth $22 billion on December 31.
Warren Buffett’s luck changed this year, allowing him to spend a record sum on stocks and end his deal drought. Here are his 6 highlights of 2022.
Warren Buffett spent a record sum on stocks and made a major acquisition in 2022.
The Berkshire Hathaway CEO tore into bitcoin, adjusted some overseas bets, and gave a surprise gift.
Here are the investing icon’s 6 highlights of 2022.
Warren Buffett’s luck changed in 2022. After years of battling to find bargains and watching Berkshire Hathaway‘s cash stack up, the famed investor seized his chance to put his conglomerate’s mountain of money to work.
Buffett spent a record sum on stocks, executed a major acquisition, and made some striking changes to his overseas bets. He also crowed about four of Berkshire’s key holdings in his yearly letter, trashed bitcoin at the annual shareholders’ meeting, and made a surprise donation to his children’s charities.
Here are Buffett’s 6 highlights from 2022:
The annual letter
Buffett published his famous annual letter to Berkshire shareholders in February.
The investor vented his frustration with Berkshire’s mammoth $144 billion cash pile, blaming a lack of bargains in the stock market. He also celebrated the “Four Giants” among Berkshire’s businesses: insurance, railroads, energy, and its enormous Apple stake.
Moreover, Buffett appeared to respond to criticism of his tax practices by noting Berkshire paid $3.3 billion of federal income tax in 2021 — nearly 1% of all the corporate income taxes collected by the US government that year.
Buffett struck a deal to buy Alleghany for nearly $12 billion in March. Berkshire completed its takeover of the insurer in October, ending a years-long drought on the acquisition front.
The investor showcased his trademark approach to dealmaking, which prizes trust and simplicity. He proposed the merger over dinner with Alleghany’s CEO, who previously ran a Berkshire subsidiary, and the pair formally announced a deal less than two weeks later.
Buffet also refused to budge on the deal terms, and when Alleghany enlisted Goldman Sachs as a financial advisor, he insisted the investment bank’s fee was subtracted from Berkshire’s offer price.
An epic buying spree
Berkshire plowed a net $41 billion into stocks in the first quarter of 2022, setting a new record for its quarterly spending on equities.
Buffett and his team built large stakes in HP, Chevron, Occidental Petroleum, Citigroup, Paramount, and Taiwan Semiconductor in the first nine months of 2022. Berkshire also spent over $5 billion on buybacks and made other sizeable purchases, lifting its spending on stocks and acquisitions for the year to an astounding $70 billion or so.
The annual meeting
Buffett hosted Berkshire’s annual shareholder meeting in his hometown of Omaha, Nebraska in April, after two years of virtual gatherings due to the pandemic.
The investor called out the reckless speculation in the stock market, underlined the grave threat posed by inflation, and declared he wouldn’t pay $25 for all the bitcoin in the world.
Buffett made some big moves in 2022 that deserve special attention. For example, he poured a total of about $30 billion into Chevron and Occidental, propelling the pair of oil-and-gas companies onto the list of Berkshire’s most-valuable holdings.
The investor and his team also revealed in November they had boosted their billion-dollar bets on Japan’s five largest trading houses.
In contrast, they sold BYD shares for the first time in 14 years. Berkshire has now slashed its position in the Chinese electric-vehicle maker by around 22%, and pocketed an estimated $1.2 billion profit from the disposals.
An unexpected gift
Buffett made his usual annual donation of Berkshire stock in June, dividing the $4 billion gift between the Bill & Melinda Gates Foundation and four of his family’s charities.
Unexpectedly, he contributed a further $759 million worth of Berkshire stock to his three children’s foundations for Thanksgiving, saying he was proud of their charitable work and wanted to show his appreciation.
7/7 SLIDES
Moreover, Berkshire received $704 million in yearly dividends from Coca-Cola last year, and $302 million from American Express, Buffett noted. When it first completed building both positions in 1994 and 1995 respectively, they paid only $75 million and $41 million in annual dividends.
Load Error
Buffett noted that during his almost 60 years in charge of Berkshire, the bulk of his wagers have been “no better than so-so,” and some of his mistakes have been mitigated by “very large doses of luck.”
“The lesson for investors: The weeds wither away in significance as the flowers bloom,” he said. “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.”
The 92-year-old investor also spoke up in defense of buybacks after the US government imposed a 1% tax on them last year.
“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),” he said.
Moreover, Buffett castigated corporate bosses who take pride in massaging their companies’ financials to beat analysts’ estimates.
“That activity is disgusting,” he said. “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.”
In his letter, Buffett underlined the fact that Berkshire has contributed about 0.1% of the $32 trillion in taxes collected by the US Treasury in the decade to 2021. He underscored his company’s willingness to fund the country responsible for its prosperity.
“At Berkshire we hope and expect to pay much more in taxes during the next decade,” he said. “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. We count on the American Tailwind and, though it has been becalmed from time to time, its propelling force has always returned.”
Moreover, Buffett underscored his conservative, long-term focused management style, and emphasised his hope that his company will live on long past his demise.
“We will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses,” he said. “At Berkshire, there will be no finish line.”
