Warren Buffett has praised Apple’s CEO Tim Cook, slammed companies that deceptively adjust their earnings, and reiterated his long-term investing approach in his annual letter to Berkshire Hathaway shareholders, that was published on Saturday.
The Oracle of Omaha also underscored his frustration with holding cash instead of owning businesses, emphasized interest rates’ influence on asset valuations, and reflected on his years of teaching.
Here are Buffett’s 7 best quotes from his latest shareholder letter:
1. “Charlie and I are not stock-pickers; we are business-pickers.”
Note: Buffett here noted that he and his business partner, Charlie Munger, buy stocks based on their expectations of long-term business performance, not in anticipation of short-term market moves. He may have been responding to confusion about the timing of Berkshire’s Activision-Blizzard bet.
2. “Tim Cook, Apple’s brilliant CEO, quite properly regards users of Apple products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well.”
Note: Buffett here highlighted Berkshire’s almost $800 million in yearly dividends from Apple, its growing stake due to the iPhone maker’s stock buybacks, and its claim on paper to $5.6 billion of Apple’s earnings.
3. “Deceptive ‘adjustments’ to earnings – to use a polite description – have become both more frequent and more fanciful as stocks have risen. Speaking less politely, I would say that bull markets breed bloviated bull.”
4. “Charlie and I have endured similar cash-heavy positions from time to time in the past. These periods are never pleasant; they are also never permanent.”
Note: Buffett here emphasized that Berkshire’s $144 billion cash pile was “not some deranged expression of patriotism,” and he overwhelmingly preferred owning businesses at the right price.
5. “Long-term interest rates that are low push the prices of all productive investments upward, whether these are stocks, apartments, farms, oil wells, whatever. Other factors influence valuations as well, but interest rates will always be important.”
6. “Teaching, like writing, has helped me develop and clarify my own thoughts. Charlie calls this phenomenon the orangutan effect: If you sit down with an orangutan and carefully explain to it one of your cherished ideas, you may leave behind a puzzled primate, but will yourself exit thinking more clearly.”
7. “Along the way, my toughest audience was my grandson’s fifth-grade class. The 11-year-olds were squirming in their seats and giving me blank stares until I mentioned Coca-Cola and its famous secret formula. Instantly, every hand went up, and I learned that ‘secrets’ are catnip to kids.”
You can find the full shareholder letter here.