Billionaire investor Warren Buffett has expressed his unwavering faith in the US economy and his company, Berkshire Hathaway Inc., in his annual letter to shareholders. Despite factors such as higher inflation dampening stock prices in 2022, Buffett urged investors to focus on the big picture over the long term, and not be swayed by temporary setbacks.
Buffett’s letter also encouraged Americans not to be overly self-critical and self-doubting, citing the country’s dynamism as a key factor in Berkshire’s success over the last 58 years. He also expressed his belief that the US economy will continue to prosper, even after he steps down.
Berkshire Hathaway posted a record $30.8 billion operating profit in 2022, making it a “good year” for the company, despite rising inflation, interest rates, and supply chain disruptions. Berkshire also repurchased $7.9 billion of its own stock in 2022, signaling its confidence that it was undervalued.
Buffett defended buybacks, which have been targeted by politicians in Washington. In the same letter, he downplayed Berkshire’s annual net loss of $22.8 billion, compared to an $89.8 billion gain in 2021, attributing it to the volatility of accounting rules.
Berkshire Hathaway owns a vast investment portfolio and dozens of operating businesses, including well-known consumer brands such as Dairy Queen, Duracell, and Fruit of the Loom, as well as the Geico car insurer and BNSF railroad. It employs over 382,000 people.
Buffett’s Humility
Despite being one of the world’s most famous investors, Buffett demonstrated humility in assessing his own investment prowess. He acknowledged that most of his capital allocation decisions were “so-so,” and that Berkshire’s satisfactory results over time were the result of only a dozen or so truly good decisions.
Buffett also emphasized that “efficient” markets only exist in textbooks, and that marketable stocks and bonds can be baffling, with their behavior usually only understandable in retrospect.
In the same letter, Buffett stressed the importance of trust and rules in running large businesses, even in the face of inevitable disappointments, and urged investors not to be too focused on near-term market conditions.
Buffett’s Criticism
Buffett appeared to indirectly criticize President Joe Biden in his letter, who recently called for a quadrupling of the 1% tax on corporate stock buybacks that became law in his Inflation Reduction Act last August. While Biden has not called for an end to buybacks, Buffett argued that those who claim that all repurchases are harmful to shareholders or the country, or particularly beneficial to CEOs, are either economically illiterate or silver-tongued demagogues.
Conclusion
Buffett’s annual letter to shareholders expresses his enduring confidence in the US economy and Berkshire Hathaway’s future, urging investors to focus on the big picture over the long term. Despite setbacks such as higher inflation, the company’s record operating profit in 2022 and its share buybacks demonstrate its confidence in its value. While Buffett acknowledged the volatility of accounting rules and the unpredictability of marketable stocks and bonds, he stressed the importance of trust and rules in running large businesses, and criticized those who demonize corporate stock buybacks.
