The Oracle of Omaha strikes again 💰

On Saturday, Warren Buffett released his 2023 letter to Berkshire Hathaway shareholders. The letter was met with mixed reviews, but one thing he didn't mince words on? Stock buybacks.

28 Feb

"Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future."

— Warren Buffett

👋 Friends, Rallie here. Your best friend in crypto, finance, and tech. The Warren Buffett to your Charlie Munger.

On the menu:

  • 💰 Berkshire's 2023 letter

  • 🗞️ Headlines that hit

  • 📈 Refresh: stock buybacks

  • 💯 Top tweets

Rallie Recap

💰This week, the Oracle of Omaha (aka Warren Buffett) released his 2023 letter to Berkshire Hathaway shareholders. The letter was met with mixed reviews, but one thing he didn't mince words on? Stock buybacks.

Here are the key takeaways:

  • In the letter, Buffett defended stock buybacks, a practice Berkshire Hathaway started in 2011, as he believes they're beneficial to all shareholders, saying, “The math isn’t complicated: When the share count goes down, your interest in our many businesses goes up." ...Buffett then pushed back at buyback critics, calling them “economic illiterate.” Ouch.

  • Unlike most companies in 2022, Berkshire Hathaway managed a steady return of 4% for its shareholders, while also reporting record operating earnings for the year of $30.8 billion.

  • Once again, Buffett proved why he's a lifelong enthusiast of the ol' buy and hold strategy: In 1994, Berkshire completed a 7-year purchase of 400M shares of Coca-Cola for $1.3B. And in 2022, Berkshire received a whopping $704M back in dividends. Not bad, not bad at all.

  • Buffett also wrote that he credits his company’s exceptional success to “a dozen truly good decisions” throughout his 58 years of running the firm.

  • Lastly, Buffett believes that cash is queen, and always keeps a bunch on hand to help the company weather storms and jump on buying opportunities. Read the full letter here.

By the way, Warren Buffett turns 93 this year... The man has some real staying power.

Headlines That Hit

Rallie Refresh: Stock Buybacks

💸 You know what we think is cool? Understanding corporate finance speak. And since stock buybacks are a hot topic these days, we're going to break it down. Here's what you need to know:

  • A stock buyback (also known as a share repurchase) is when a company buys back its own shares from the market.

  • This reduces the number of shares available to the public and increases the ownership percentage of the remaining shareholders.

  • Companies can use cash reserves, debt, or excess capital to fund stock buybacks.

🤔 So why do companies do it?

  • A stock buyback can boost a company's earnings per share (EPS). By reducing the number of shares outstanding, the company's earnings are divided among fewer shares, resulting in a higher EPS.

  • It can also signal confidence in the company's financial health to investors. A stock buyback can demonstrate that the company believes its shares are undervalued and that it has the financial resources to buy them back.

  • It can prevent a hostile takeover by making it harder for outsiders to acquire a controlling stake.

  • And let's be real...sometimes it's just a fancy way to return value to shareholders and make the company look good.

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DISCLAIMER: This is not financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions.