Berkshire Hathaway 2022 Annual Letter

The bottom line: Compounding only works if you do not interrupt it. This letter shows exactly what happens when you buy a great business at a fair price and hold it for decades — and why the discipline required to actually do that is far rarer than the intelligence required to identify the opportunity.

Compounding requires patience almost nobody has

• Berkshire paid $1.3 billion for Coca-Cola; by 2022 it was worth $25 billion and paying $704 million annually in dividends
• None of this required a single additional decision — just the refusal to sell
• The instinct to "take profits" on winning positions is one of the most costly habits in investing

GAAP earnings are not the same as business performance

• Berkshire's GAAP earnings swung from +$5.5 billion to -$43.8 billion in consecutive quarters — driven entirely by stock price movements
• Operating earnings of $30.8 billion told the real story — what the underlying businesses actually produced
• Learn to distinguish between accounting figures and actual cash generation before evaluating any company

Share buybacks done right benefit every remaining shareholder

• When a company repurchases shares below intrinsic value, each remaining share becomes worth more
• When a company overpays for repurchases — which many do — it destroys value for continuing shareholders
• Understand what a company is worth before celebrating its buyback program

Cash is optionality, not laziness

• Substantial cash reserves attracted criticism as "uninvested" — but that cash is what enabled Berkshire's best deals during crises
• Cash held by a disciplined allocator is not idle — it is waiting for the moment when everyone else is forced to sell
• Investors who cannot hold cash patiently are the same investors who cannot act decisively when opportunity arrives

The 2022 Annual Letter

Buffett on compounding, patience and the power of holding businesses

Download

Berkshire Hathaway 2024 Annual Letter

The bottom line: Likely one of Buffett's last letters as CEO, this is the clearest articulation of why equities will always be Berkshire's primary asset — and why operator quality, patient compounding, and disciplined capital allocation are the only variables that actually matter over long periods.

Operator quality is the most underrated variable

• Pete Liegl built Forest River into a multi-billion dollar contributor — asked for $100,000 salary and a simple bonus arrangement
• The alignment between what a manager wants and what shareholders need is the most important factor in any investment
• The right operator can make a mediocre business exceptional; the wrong one can destroy even a great business

Retained earnings compound into something extraordinary

• Berkshire paid $26.8 billion in federal taxes in 2024 — because it retained and reinvested earnings for 60 years
• The only dividend ever paid was $0.10 per share in 1967 — every dollar since has compounded inside the business
• The lesson is not about taxes — it is about what happens when you resist the urge to consume what compounding is building

Equities are always the right long-term asset

• Cash and bonds provide no protection against inflation over long periods; businesses with pricing power do
• Moving to "safety" during uncertainty almost always costs more in long-term returns than the volatility it avoids
• Berkshire will always hold the great majority of its capital in equities — regardless of market conditions

The same criteria work anywhere in the world

• The Japan trade — cheap valuation, durable business, aligned management, strong dividends — used the same framework applied domestically
• Geographic familiarity bias causes most investors to ignore the best opportunities simply because they are unfamiliar
• Interest cost of $135 million against dividend income of $812 million annually — the numbers work the same in any currency

The 2024 Annual Letter

Buffett's most recent letter, covering six decades of lessons

Download