Reuters/Rick Wilking
- 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.
Moreover, Berkshire received $704 million in yearly dividends from Coca-Cola last year, and $302 million from American Express, Buffett noted. When it completed building those positions in 1994 and 1995 respectively, they paid only $75 million and $41 million in annual dividends.
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, and President Joe Biden signaled his support for raising it to 4%.
Buffett and his team bought back nearly $8 billion of Berkshire shares last year. They spent a record $27 billion on them in 2021, and around $25 billion in 2020, making Berkshire one of the nation's largest repurchasers in recent years.
"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)," Buffett 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 emphasized 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."