“We like a business with enduring competitive advantages that is run by able and owner-oriented people. Inherently, the risk that the investor runs is that by forgoing consumption now, he may not have the ability to consume more later. Rather, Buffett feels that real risk is not volatility, but the potential that after-tax receipts from an investment will not result in a gain in purchasing power.

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You can view and download every letter below. The Buffett Bible includes every Warren Buffett partnership and Berkshire Hathaway Shareholder letter from 1957 to Present. Ask the publishers to restore access to 500,000+ books.

What readers of these letters gain is far more than a list of rules for successful investing in the market.

He goes on to state that, as opposed to Adam Smith’s “invisible hand,” hyperactive markets act like an “invisible foot,” tripping up and slowing down a progressing economy. But investors should understand that what is good for the croupier is not good for the customer. Just insert the correct numbers, and you can rank the attractiveness of all possible uses of capital throughout the universe.” Both of these criteria are of vital importance to Buffett’s investment decision-making, but regrettably he does not go into a great deal of detail on either subject.

Buffett desires shareholders who intend to hold Berkshire stock for the long term, and lowering the price of Berkshire stock to make it more tradable would inherently bring in a more trigger-happy brand of owner who is more than happy to jump in and out of Berkshire stock as he/she pleases. “We will try to avoid policies that attract buyers with a short-term focus on our stock price and try to follow policies that attract informed long-term investors focusing on business values.” (1983) While this approach may be simpler and more predictable, Buffett contends that if serious thought is not put into which earnings should be retained and berkshire hathaway letters to shareholders which should be distributed, shareholders are hurt because they are not earning an optimal (manimum) rate of return. “We test the wisdom of retained earnings by assessing whether retention, over time, delivers shareholders at least $1 of market value for each $1 retained.” (1983)

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• When this happens, directors who are not content with the quality of management or fear that management is becoming too greedy can go directly to the owner and report their dissatisfaction.
• First, the company must have available funds (cash on hand plus sensible borrowing capacity).
• Britt always taught us Titans that Wisdom is Cheap, and principal can find treasure troves of the good stuff in books.
• Brokers, using terms such as ‘marketable’ and ‘liquidity’, sing the praises of companies with high share turnover (those who cannot fill your pocket will confidently fill your ear).

In his 1988 letter, he backs up his position using his own investing career.

It applies to outlays for farms, oil royalties, bonds, stocks, lottery tickets, and manufacturing plants. This is why Buffett characterizes them as “moats” and why they are such an integral part of his long term investment decisions. Additionally, Buffett states that the criterion of durability eliminates businesses whose success depends on having a great manager. The standard of durability has served Buffett well over the years, keeping him out of the tech bubble in the late 1990s because the standard inherently eliminates companies in industries prone to rapid change. The highest praise that he can bestow upon his managers is that they “unfailingly think like owners.”

Indeed, these letters can at times provide a window into the mind of a man who is widely considered to be the greatest investor of all time. Additionally, when able but greedy managers begin to “dip too deeply into shareholders’ pockets, directors must slap their hands.” Over this period, an average market return would have grown a $1,000 investment to $405,000 if all income had been reinvested. Buffett strongly opposes the idea that stock prices always reflect all publicly available information. This emphasis on trading equal amounts of intrinsic business value ensures that neither party in any of Berkshire’s acquisitions will be taken advantage of, and is ultimately the most fair basis upon which to make a stock-for-stock transaction.

Buffett first mentions his philosophy on market fluctuations in his 1974 letter.

“In stating this opinion, we define risk, using dictionary terms, as ‘the possibility of loss or injury.’” (1993) Following these results is usually a discussion of how the change in intrinsic value is the metric that counts, but that book value is a conservative substitute that approximately tracks intrinsic value. Berkshire’s goal is to keep the companies operating exactly as they were before the purchase. Berkshire’s cost-free float, while carried on its books as a liability, has proven to be one of its greatest assets. Comparatively, an $18 investment in the S&P 500 in 1965 would have compounded at an annual rate of 9.4% and been worth $1,343 in 2012.

Obviously the stock was riskier at the higher price by Buffett’s definition, but its beta was much higher only after its price dropped (and the risk was largely removed). When discussing his purchase of stock in the Washington Post in his 1993 letter, Buffett states that “the academics’ definition of risk is far off the mark, so much so that it produces absurdities. In order to use market quotes to his advantage, the investor must not ever be in a position of being forced to sell at any given time.

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• In his mind, the best directors are those who have their interests best aligned with shareholders.
• “We test the wisdom of retained earnings by assessing whether retention, over time, delivers shareholders at least $1 of market value for each $1 retained.” (1983)
• The 20% average return produced by Buffett over this period would have grown a $1,000 original investment to $97 million.
• By viewing market prices as quotes from a manic-depressive business partner, the investor is now put in a position of power over market prices rather than enslaved by them (a far-too-common occurrence).

Above all, readers see the “Oracle of Omaha” at work each year, shaping an investing career that may not ever be replicated. These directors are incentivized to stay on the board, which often means choosing not to offend a CEO or fellow directors so that his popularity with management can remain strong and he can continue to collect directors’ fees. In fact, being a major, long-term shareholder is one of the primary qualities that Buffett takes into account when searching for directors.

If board members lack either integrity or the ability to think independently, the directors can actually do a great deal of harm to shareholders. At this point, Buffett has seen many CEO’s taking various actions that hurt their shareholders, including reckless acquisition and employing questionable accounting practices. The 20% average return produced by Buffett over this period would have grown a $1,000 original investment to $97 million. Over these same 63 years, the average market return was just under 10%, including dividends. Under the right circumstances, there is very little that a manager can do to benefit his/her shareholders more than repurchasing undervalued shares. Additionally, managers conducting share repurchases demonstrate their shareholder-oriented mindset that Buffett values so highly.

Buffett himself has said that he was “wired at birth to allocate capital,” which is evident not only through his impressive track record, but also through the tremendous amount of wisdom exuded in each of his letters. Along the way, Buffett allows his shareholders tremendous insight not only into the internal affairs of Berkshire, but also into his thoughts on a vast array of material, ranging from corporate governance to dividend policy. This brief will attempt to capture a glimpse of the wisdom provided by Buffett in his forty-eight annual letters. Due to his consistent outperformance of the market, Buffett has been dubbed “The Oracle of Omaha” and is widely considered the greatest investor of all time. More importantly, from time to time Buffett will share his views on a number of different topics ranging from market fluctuations to accounting for intangible assets.

Brokers, using terms such as ‘marketable’ and ‘liquidity’, sing the praises of companies with high share turnover (those who cannot fill your pocket will confidently fill your ear). With regard to his policy of concentrating his holdings, Buffett states that he feels that his risk is actually reduced by investing in companies with which he is familiar and fairly certain of their long term prospects. The purpose of the durable competitive advantage is not to boost growth or expected future earnings, but rather to ensure that a company’s current level of profitability can be maintained in the future through adverse events that may occur along the way.

As discussed, Buffett does not view volatility as an adequate measure of investment risk. Thus, volatility actually works in favor of the intelligent investor because increased volatility creates increased opportunity to take advantage of even lower lows and higher highs. The investor can always use Mr. Market to his advantage as long as he understands that Mr. Market’s purpose is to serve him rather than to guide him.

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These forty-eight letters do not provide a magic formula for valuing companies or maximizing profit in the market. Through Warren Buffett’s annual letters to his shareholders, his readers follow Berkshire’s journey from struggling textile mill to diversified juggernaut with a great amount of detail. The knowledge that he lends in his letters, while perhaps not as monetarily beneficial as investing in a few shares of Berkshire back in 1965, is incredibly valuable to any person who wishes to learn the art of investing. The per share stock price has risen from $22.54 in 1977, to over $340,000 today. It’s a compilation of every letter Warren Buffett wrote to the shareholders of Berkshire Hathaway.

By 2012, that same share would trade for $134,060, compounding at an annual rate of 20.4%. In 2012, forty-eight years later, Buffett discusses his 50% purchase of a holding company that will own 100% of H.J. The letter was one page long and dealt with topics that included liquidating the assets of one textile mill and changes in Berkshire’s inventory. Stephen Foley at FT Alphaville has a great breakdown of Buffett’s letter here, which serves a great curtain raiser ahead of the 50th annual Berkshire letter.

I’ve compiled every Berkshire Hathaway shareholder letter from 1977 to 2024 in one downloadable PDF. The Berkshire Hathaway returns, on a per share basis, over it’s lifetime are absolutely staggering. The entire book is paginated, and has easy-to-flip-to labels for each letter’s year. A combination of traits is required, including an understanding of true risk and market fluctuations. Buffett makes it clear that investing is far from a science and that there is much more to being a successful investor than being the smartest person in the room. Clearly, these letters serve a far greater purpose than simply the ability to follow the activities of Berkshire Hathaway on a yearly basis.

I’m excited to announce the release of a book I’ve been working on for about 6 months now, and first started in 2010.

Buffett often states that he has two major standards by which he evaluates his management. The best way to ensure this is to invest in companies employing low levels of leverage and enough financial strength to weather inevitable storms down the road. This is a two-pronged approach for assessing the underlying economics of a company. Neither Graham nor Buffett place any sort of value on market forecasts, and while past performance is no indication of future success, it is still a far better indicator than any market forecast previously produced. Graham had his own list of various criteria that had to be met in order to ensure a company’s financial strength, and one of them was consistent strong earning power in the past. Buffett simply defines investing as “forgoing consumption now to have the ability to consume more later.”