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www .berkshirehathaway .com. Signature. Warren Edward Buffett ( / ˈbʌfɪt / BUF-it; born August 30, 1930) [2] is an American businessman, investor, and philanthropist who currently serves as the co-founder, chairman and CEO of Berkshire Hathaway. As a result of his investment success, Buffett is one of the best-known investors in the world.
- Susan Alice Buffett
Susan Alice Buffett (born July 30, 1953) is an American...
- Howard Graham Buffett
Howard Graham Buffett (born December 16, 1954) is an...
- Peter Andrew
Peter Andrew Buffett (born May 4, 1958) is an American...
- Berkshire Hathaway
Berkshire Hathaway Inc. (/ ˈ b ɜːr k ʃ ər /) is an American...
- Doris Buffett
Doris Eleanor Buffett (February 12, 1928 – August 4, 2020)...
- Howard Warren Buffett
Howard Warren Buffett (born October 14, 1983) is an American...
- Gary Green
Gary Michael Green (born September 8, 1965) is an American...
- New York Institute of Finance
The New York Institute of Finance (NYIF) is an American...
- Value Investing
A young Warren Buffett studied under Ben Graham, took his...
- Kathy Ireland
Kathleen Marie Ireland (born March 20, 1963) is an American...
- Susan Alice Buffett
Feb 27, 2021 · Warren Buffett, chairman and CEO of Berkshire Hathaway. Warren Buffett released his annual letter to Berkshire Hathaway shareholders on Saturday. The 90-year-old investing legend has been ...
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- Executive Compensation
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- Investment Strategy
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1. Executives should only eat what they kill
In 1991, Berkshire Hathaway acquired the H. H. Brown Shoe Company, at the time the leading manufacturer of work shoes in North America. In his shareholder letter that year, Buffett talked about a few of the reasons why. While Buffett recognized that shoes were a tough industry, he liked that H. H. Brown was profitable. He liked that the company’s CEO, Frank Rooney, would be staying on. And he definitely liked the company’s “most unusual” executive compensation plan, which he wrote, “warms my...
2. Don’t give your executives stock options as compensation
In 2000, the dotcom bubble burst. Across the world, companies shuttered their doors and investors lost thousands or even millions on their holdings. At the same time, many executives at companies that had failed or suffered huge losses (and whose shareholders had suffered in turn) received record levels of compensation. In spring 2001, Cisco’s shareholders had lost a total of 28.6% on their investment — yet CEO John Chambers took home $157M, mostly on his stock options (about $330,000 of that...
3. Buy stock as an owner, not a speculator
When many investors buy stock, they become price-obsessed, constantly checking the ticker to see if they’re up or down money on any given day. From Buffett’s perspective, buying a stock should follow the same kind of rigorous analysis as buying a business. “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes,” he wrote in his 1996 letter. Rather than getting too caught up in the price or recent movement of a stock, Buffett says, buy from compan...
4. Don’t ignore the value of intangible assets
Companies have both tangible assets (factories, capital, inventory) and intangible assets, which include things like reputation and brand. For Buffett, those intangible things are of the utmost importance for value-driven investors. But he didn’t always believe that. Earlier in his investing career, he admits, he was a servant of tangible assets only. By 1983, however, Buffett’s attitude had changed — largely because of the success of one of his favorite businesses at the time, See’s Candy St...
5. Conglomerates earned their terrible reputation
Conglomerates are corporations made up of multiple different businesses. According to Buffett, the term — which carries a negative connotation — has often been applied to Berkshire. However, he argues that defining Berkshire as a conglomerate is only partially correct. And in his 2020 letter, Buffett goes on to explain that “conglomerates earnedtheir terrible reputation” and why owning stocks in these businesses may not be the best investment strategy. For one, conglomerates tend to buy compa...
6. Ignore short-term movements in stock prices
For the layman stock investor, the price is everything — buy low, sell high. There’s even a Wall Street proverb to this effect: “you can’t go broke taking a profit.” Buffett disagrees completely with this approach, and he ranks this maxim as perhaps the “most foolish” of all of Wall Street’s sayings. And with Berkshire’s portfolio, he is adamant that the price of a stock is one of the least important factors to consider when deciding whether to buy or sell shares in a particular company. The...
7. Be fearful when others are greedy, and greedy when others are fearful
In the aftermath of the 2007-2008 financial crisis, few economic dogmas were hit harder than the efficient markets hypothesis, or the idea that the price of an asset reflects the market’s rational assessment of available information about it. When it became clear that executives at some of the biggest banks on earth systematically underestimated the risks inherent to the assets they were trading in, it became difficult to defend the idea that prices were truly ever set rationally. In the afte...
8. Save your money in peacetime so you can buy more during war
In 1973, Buffett made one of his most successful investments ever in the Washington Post. At the time, the Post was widely regarded to have a value somewhere between $400M and $500M — though its stock ticker put it at only $100M. That was, for Buffett, a signal to buy. For just $10M, he was able to acquire more than 1.7M shares. The underlying philosophy here is simple: hold onto your money when money is cheap, and spend aggressively when money is expensive. In 1973, the country was still in...
9. Look for companies that reinvest their earnings into growth
Warren Buffett is well known for his love of companies that pay dividends, and Berkshire Hathaway has profited greatly from companies making payouts to their shareholders. In his 2019 shareholder letter, Buffett reported that Berkshire Hathaway’s top 10 stock investments had generated almost $3.8B in dividends over the previous year. However, perhaps even more than paying dividends, Buffett values the corporate practice of reinvesting profits into growth. Among those top 10 Berkshire Hathaway...
10. Don’t invest in businesses that are too complex to fully understand
When Berkshire Hathaway announced that it was taking a $1B stake in Apple in 2016, it surprised many of the company’s long-time observers — not because of Apple’s business model or stock price, but because Buffett had long claimed to have “insufficient understanding” of technology to invest in tech companies. They were right to be suspicious: a few weeks later, Buffett confirmed that it was one of his recent manager hires who had pulled the trigger on the deal. In his 1986 letter to sharehold...
11. Invest in unsexy companies that build products people need
In his 1996 letterto shareholders, Buffett recounts Coca-Cola’s 1896 shareholder report, admiring how the company had set — and closely followed — its 100-year growth plan, while the core product of the company had not changed at all. Buffett uses the example of Coca-Cola to explain one of the biggest tenets of his and Charlie Munger’s investing philosophy: invest in boring companies that are likely to be around for a long time, and avoid investing in anything innovative or revolutionary, no...
14. Never invest because you think a company is a bargain
Buffett’s distrust of bargains comes mostly from a series of poor acquisitions and investments he made early on in the life of Berkshire Hathaway. One striking example that he discusses at length in his 1979 letter to shareholders is that of Waumbec Mills in Manchester, New Hampshire. Buffett decided to purchase Waumbec Mills a few years prior because the business was priced so low — in fact, the price was below the working capital of the business itself, meaning Buffett acquired “very substa...
15. Don’t invest only because you expect a company to grow
Buffett is known for his advocacy of the value investing paradigm — buying shares of companies that are underpriced relative to their value according to some kind of analysis of company fundamentals, meaning its dividend yield, price-to-earnings multiple, price-to-book ratio, and so on. Buffett’s personal formulation of the strategy is simply “finding an outstanding company at a sensible price” as opposed to finding mediocre companies for cheap prices. But his embrace of “value investing” doe...
16. Never use your own stock to make acquisitions
One of Buffett’s self-proclaimed worst mistakes as an investor came with his all-stock acquisition of Dexter Shoe Company in 1993. This was one of Berkshire Hathaway’s first major acquisitions in its transition to earning most of its revenue by acquiring other companies. Before this, Berkshire Hathaway had mostly made money from investing in stocks. With Dexter Shoe, Buffett picked possibly the worst company to help in this transition. Within a few years, the relatively high priced Dexter sho...
17. America is not in decline — it’s becoming more and more efficient
In 2009, while America was still gripped by the effects of the Great Recession, Berkshire Hathaway made one of its largest purchases ever: BNSF Railway Company. He called it an “all-in wager on the economic future of the United States.” While Buffett believes that other countries, particularly China, have very strong economic growth ahead of them, he is still bullish, above all, for his home turf of the United States. Buffett, who was born in Omaha in 1930 and got his start in business workin...
18. Current board of director incentives are broken and backwards
Warren Buffett has a complicated relationship with boards. On the one hand, he has a long history of serving on them: according to his 2019 shareholder letter, he has served as a director on the board of a total of 21 publicly owned companies over 62 years. On the other hand, he is deeply suspicious of what he sees as the modern-day trend of corporate boards incentivizing directors to be passive accomplices to whatever a CEO wants to do. Boards aren’t all bad for Buffett. He identifies severa...
19. Embrace the virtue of sloth
Asked to imagine a “successful investor,” many would imagine someone who is hyperactive — constantly on the phone, completing deals, and networking. Warren Buffett could not be farther from that image of the hustling networker. In fact, he is an advocate of a much more passive, 99% sloth-like approach to investing. For him, it is CEOs and shareholders’ constant action — buying and selling of stocks, hiring and firing of financial advisers — that creates losses. “Long ago,” he wrote in his 200...
20. Time is the friend of the wonderful business, the enemy of the mediocre
By 1989, Warren Buffett was convinced that buying Berkshire Hathaway had been his first big mistake as an investor. (By 2010, Buffett would say it was his biggest mistake ever — according to him, buying the company rather than insurance companies directly denied him returns of approximately $200B over the next 45 years.) He bought Berkshire Hathaway because it was cheap. He knew that any temporary “hiccup” in the fortunes of the company would give him a good opportunity to offload the busines...
21. Complex financial instruments are dangerous liabilities
In 1998, Berkshire Hathaway purchased “General Re,” or the General Reinsurance Corporation. In his 2008 letter, Buffett relates how he and Charlie Munger realized immediately that the business was going to be a problem. General Re had been operating as a dealer in the swap and derivatives market, making money on futures, options on various foreign currencies and stock exchanges, credit default swaps, and other financial products. While Buffett himself has professed to using derivatives at tim...
23. Leaders should live the way they want their employees to live
In his 2010 shareholder letter, Buffett provided a breakdown of all the money that is spent outfitting Berkshire’s “World Headquarters” in Omaha, Nebraska: By 2017, Berkshire Hathaway had hit about $1M in total annual overhead, according to the Omaha World-Herald — a paltry sum for a company with $223B in annual revenues. The point of this breakdown is not to show off Berkshire’s decentralized structure, which offsets most operational costs to the businesses under the Berkshire umbrella, but...
24. Hire people who have no need to work
In shareholder letter after shareholder letter, Buffett reminds his readers that the true stars of Berkshire Hathaway are not him or Charlie Munger — they are the managers that run the various companies under the Berkshire Hathaway umbrella. Warren Buffett’s hiring strategy, as he explains it, is relatively simple: find people who love what they do and have no need for money, and then give them the most enjoyable job they could possibly have. Never force them into a meeting, or a phone call,...
25. Compensation committees have sent CEO pay out of control
In 2017, word got out that Yahoo CEO Marissa Mayer had been making a staggering $900K a weekduring her 5 years at the beleaguered company. This was a massive sum even by Silicon Valley standards, and many were shocked that someone with such a poor record made out so well. Yahoo wasn’t doing well when she arrived, but many said her management style and decisions made it worse. She resigned in 2017 after the company was sold to Verizon. Despite poor performance as CEO, Marissa Mayer made millio...
26. Never use borrowed money to buy stocks
If there’s a practice that infuriates Warren Buffett more than poorly structured executive compensation plans, it is going into debt to buy stocks or excessively finance acquisitions. Much of Berkshire’s early success came down to the intelligent use of leverage on relatively cheap stocks, as a 2013 study from AQR Capital Management and Copenhagen Business School showed. But Buffett’s main problem is not with the concept of debt — it is with the type of high-interest, variable-rate debt that...
27. Borrow money when it’s cheap
The Oracle of Omaha’s famous cost-consciousness does not mean that Berkshire Hathaway never borrowed money or went into debt — on the contrary, Buffett makes clear in his letters that he is enthusiastic about borrowing money in one type of circumstance. Buffett is an advocate of borrowing money at a modest ratewhen he believes it is both “properly structured” and “of significant benefit to shareholders.” In reality, that usually means when economic conditions are tight and liabilities are exp...
28. Raising debt is like playing Russian roulette
All across the business world, from big, corporate boardrooms to the offices of venture capitalists, managers employ the use of debt to juice returns. Whether it’s a company like Uber taking on $1.5B to re-energize its slowing growth or a startup like Cedartaking on $25M to find that initial growth curve, debt offers companies a way to acquire capital without giving up room on their cap table or diluting existing shares. Debt also forces shareholders into a Russian roulette equation, accordin...
May 21, 2022 · Somer Anderson. Fact checked by. Vikki Velasquez. Berkshire Hathaway Inc. ( BRK.A) released its 2020 annual report on Feb. 27, 2021, and the letter to shareholders from Chair Warren...
- Mark Kolakowski
Feb 27, 2021 · Warren Buffett released his eagerly anticipated annual letter to shareholders today, something the 90 year old has done for six decades. Two of the takeaways in a year like no other are that his ...
Feb 27, 2022 · Warren Buffett released his Berkshire Hathaway letter to shareholders. I will be highlighting 3 top takeaways from this letter to shareholders. Click here to read more.
2021. 2022. 2023 . For ... a book that compiles the full unedited versions of each of Warren Buffett’s letters to shareholders between 1965 and 2014 is available ...
