What I learned by reading Warren Buffet‘s most recent Annual Letter

As you know I am currently on holidays and this is another piece I read: Warren Buffet’s annual letter to all Shareholders. You can find the full version here.

Legendary Letter for Investors

Warren Buffett’s annual letter to investors holds a legendary status in the investing world. As the Chairman and CEO of Berkshire Hathaway, his insights and wisdom have shaped the strategies of countless individuals and institutions.

The most recent letter, published earlier this year, can be found here (👉🏻 pages 3-11).

In this article, I want to let you know which points I found interesting and maybe they are inspiring to you too as an longterm investor.

My Top 3 Points out of Buffet’s Letter

(1) Over time it just takes a few winners to work wonders

Buffett states that the tremendous success in 58 years of managing Berkshire has been the product of only about a dozen of really good decisions. His most famous was buying Coca-Cola shares 1994 worth $ 1.3 billion, now they are worth $ 25 billion. In addition they paid hundred’s of millions in dividends over the decades. What not so many people are aware is that almost the same success story applies to American Express, bought 1995.

(2) Share Buybacks benefit all Owners

Buffett loves share buybacks and he explained it in his recent letter. If shares are bought back at decent prices then the stake (percentage) of a shareholder increases and the one selling get the market price. In addition the earnings per share rise.

(3) Investing in a company also expresses trust

On page 7 of the letter Buffett talks about that many people, also billionaires, have invested in Berkshire without ever reading a piece of their financial results. Why? Because they trust Buffett and his partner Charlie Munger since they also have invested a lot of their own money into the company. An example of proof of stake if you want to interpret it that way. Haha!
Well, anyways, I think it is a valid point but also one with a weakness: What if Warren and/or Charlie die? What will happen to the trust into their management capabilities? Their successors will also have a big stake of Berkshire shares, that is a point Buffett made clear in the letter but is that equal to trust?

Which of the three point was most helpful for you? Do you like reading insights of Buffett or do you prefer another investment style?