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Warren Buffett annual letter Berkshire Hathaway: stock buybacks

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An Andy Warhol-inspired print of Berkshire Hathaway CEO Warren Buffett hangs outside a clothing stand at Berkshire Hathaway Inc’s first in-person annual meeting since 2019 in Omaha, Nebraska, USA on April 30, 2022.

Warren Buffett defended share buybacks in Berkshire Hathaway’s annual letter, pushing back against those who opposed a practice he believed would benefit all shareholders.

“If you are told that all buybacks are harmful to shareholders and the country, or beneficial to the CEO in particular, you either have no knowledge of economics or you are a talkative demagogue (non-mutually exclusive characters). We are listening to the story,” the 92-year-old investor said in a much-anticipated letter released Saturday.

The Oracle of Omaha launched its buyback program in 2011 and has relied on buybacks in recent years in a competitive trading environment and expensive stock market. The conglomerate spent a record $27 billion on buybacks in 2021 after Buffett saw little opportunity outside.

Buyback activity slowed to about $8 billion this year as billionaire investors sold off and bought stocks. Berkshire also acquired insurance company Allegany for $11.6 billion. This is Buffett’s biggest deal since 2016.

Stock buybacks have been criticized by politicians, who believe American companies should use cash in other ways to boost growth over the long term, such as employee benefits and capital spending. . In many cases, buybacks often contribute to increased earnings per share, and if companies stop doing it, it will be more difficult to reach that goal, he said.

Buffett believes share buybacks are beneficial to shareholders because they increase intrinsic value per share.

“The math isn’t complicated. Fewer shares mean more interest in a lot of businesses. Any buyback at a price that appreciates helps a little bit,” Buffett said. “It should be emphasized that the gains from value-enhancing buybacks benefit all owners in all respects.”

The legendary investor has highlighted Apple and American Express, two of his largest holdings with similar strategies. He said he favored a way for investors to give conglomerates ownership of every dollar of iPhone maker revenue without lifting a finger.

“At Berkshire, we repurchased 1.2% of our outstanding shares, directly driving interest in our unique portfolio of businesses,” said Buffett.

Provisions in the Inflation Reduction Act that impose a 1% exercise tax on buybacks came into effect this year.

“American Tailwind”

Buffett’s widely read shareholder letter, which comes out alongside Berkshire’s annual report, typically sets the tone ahead of the conglomerate’s big annual meeting in Omaha, Nebraska, in May.

The letter included praise for his longtime partner Charlie Munger, 99, and a willingness to pay hefty taxes for the profits Berkshire has received over the years from “American tailwinds.” It also touched on a few other subjects, such as paying.”

“I have been investing for 80 years, which is more than a third of our nation’s lifetime,” Buffett said. No, and I doubt that the readers of this letter will have a different experience in the future.”

A highly admired investor said Berkshire has always held large amounts of cash and U.S. Treasury bills and holds a wide range of businesses for the future. $130 billion.

Buffett also revealed that Berkshire’s future CEO will have a significant portion of his net worth in the conglomerate stock he bought with his own money. Buffett’s likely successor, Greg Abel, vice chairman of Berkshire’s non-insurance business, spent more than $68 million on Berkshire stock last year.

“There are no goals for Berkshire,” Buffett said.

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