Investing
Warren Buffett's 2019 letter to Berkshire shareholders, one of the letters in Berkshire Hathaway Shareholder Letters, 1971–2025.
“Charlie and I urge you to focus on operating earnings – which were little changed in 2019 – and to ignore both quarterly and annual gains or losses from investments, whether these are realized or unrealized.”
“Reinvestment in productive operational assets will forever remain our top priority.”
“In reviewing my uneven record, I’ve concluded that acquisitions are similar to marriage: They start, of course, with a joyful wedding – but then reality tends to diverge from pre-nuptial expectations.”
“Insurance is a business of promises, and Berkshire’s ability to honor its commitments is unmatched.”
“Some insurers may try to mitigate their loss of revenue by buying lower-quality bonds or non-liquid ‘alternative’ investments promising higher yields. But those are dangerous games and activities that most institutions are ill-equipped to play.”
“Mistakes in assessing insurance risks can be huge and can take many years – even decades – to surface and ripen.”
“Our perhaps jaundiced view is that the pundits who opine on [interest rates] reveal, by that very behavior, far more about themselves than they reveal about the future.”
“The bedrock challenge for directors, nevertheless, remains constant: Find and retain a talented CEO – possessing integrity, for sure – who will be devoted to the company for his/her business lifetime.”
“My direct experience (limited, thankfully) with CEOs who have played with a company’s numbers indicates that they were more often prompted by ego than by a desire for financial gain.”
“One very important improvement in corporate governance has been mandated: a regularly-scheduled ‘executive session’ of directors at which the CEO is barred. Prior to that change, truly frank discussions of a CEO’s skills, acquisition decisions and compensation were rare.”
“A venerable caution will forever be true when advice from Wall Street is contemplated: Don’t ask the barber whether you need a haircut.”
“One key point relating to [board independence], though, is almost invariably overlooked: Director compensation has now soared to a level that inevitably makes pay a subconscious factor affecting the behavior of many non-wealthy members.”
“When seeking directors, CEOs don’t look for pit bulls. It’s the cocker spaniel that gets taken home.”
“Despite the illogic of it all, the director for whom fees are important – indeed, craved – is almost universally classified as ‘independent’ while many directors possessing fortunes very substantially linked to the welfare of the corporation are deemed lacking in independence.”
“Calculations of intrinsic value are far from precise. Consequently, neither of us feels any urgency to buy an estimated $1 of value for a very real 95 cents.”