Deal-hungry CEOs find supporting forecasts
“Once a CEO hungers for a deal, he or she will never lack for forecasts that justify the purchase.”
Investing
Warren Buffett's 2017 letter to Berkshire shareholders, one of the letters in Berkshire Hathaway Shareholder Letters, 1971–2025.
Forecast synergies prop up weak acquisitions
“If the historical performance of the target falls short of validating its acquisition, large ‘synergies’ will be forecast. Spreadsheets never disappoint.”
Risking what you need is insane
“Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need.”
More prudence when others have less
“In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.”
Not relying on the kindness of strangers
“Charlie and I never will operate Berkshire in a manner that depends on the kindness of strangers – or even that of friends who may be facing liquidity problems of their own.”
Float carries oceans of risk
“The downside of float is that it comes with risk, sometimes oceans of risk. What looks predictable in insurance can be anything but.”
Insurer loss reserves are a self-graded exam
“As well-known analyst V.J. Dowling has pointed out, the loss reserves of an insurer are similar to a self-graded exam.”
Stocks as interests in businesses
“Charlie and I view the marketable common stocks that Berkshire owns as interests in businesses, not as ticker symbols to be bought or sold based on their ‘chart’ patterns, the ‘target’ prices of analysts or the opinions of media pundits.”
American equity investors have a tailwind
“In America, equity investors have the wind at their back.”
The market becomes a weighing machine
“Over time, however, Ben Graham’s oft-quoted maxim proves true: ‘In the short run, the market is a voting machine; in the long run, however, it becomes a weighing machine.’” — Ben Graham
Even small borrowings can rattle the mind
“Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.”
Major declines reward those without debt
“When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt.”
Performance fluctuates but fees persist
“Performance comes, performance goes. Fees never falter.”
Risk as failing to consume more later
“Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. ‘Risk’ is the possibility that [greater later consumption] won’t be attained.”
Long horizons make stocks safer than bonds
“As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.”
High-grade bonds can raise portfolio risk
“Often, high-grade bonds in an investment portfolio increase its risk.”
Big, easy decisions over constant activity
“A final lesson from our bet: Stick with big, ‘easy’ decisions and eschew activity.”
Directors and managers share the downside
“None, however, gets the upside of ownership without risking the downside. Our directors and managers stand in your shoes.”