Warren Buffett Defends Stock Buybacks in Annual Letter to Shareholders
In Warren Buffett's annual letter to shareholders, he argued for the positive nature of stock buybacks, at least when purchased at reasonable prices.
"When you're told that all takeovers are bad for shareholders or bad for the country, or especially good for CEOs, you're listening to either an economic illiterate or a silver-tongued demagogue (characters who don't exclude each other not mutually)" Buffett wrote in the letter.
Related: Warren Buffett Makes Over $120 Billion on Apple's $3 Trillion Milestone: 'It's Probably the Best Company I Know in the World'
As the New York Times' Dealbook noted, it was one of Buffett's shortest letters in decades and comes in the middle of what, on paper, looks like , to billions in losses for his investment firm Berkshire Hathaway amid a zig-zaggy market. (In the letter, Buffet says the company's fundamentals are still good, and he also said the number of losses is "misleading.")
Buffett is the chairman of Berkshire Hathaway, a huge investment company which, as he explains in the letter, has massive stakes in Apple, American Express and Coca-Cola. In the letter, he also included a few sentences about a tool often used by large companies in the public market: share buybacks.
This comes after President Biden said in his annual State of the Union address in January that Congress should quadruple the 1% tax on buyouts introduced by the Inflation Reduction Act . In particular, he attacked energy companies for takeovers and "rewarding their CEOs and shareholders", he said.
Exxon, for example, announced record earnings in 2022 and increased its plan from $30 billion to $50 billion in share buybacks over the next two years. Chevron announced a $75 billion share buyback program in January.
Related: Buffett's Next Bet Is One of His Biggest Ever
A stock buyback occurs when a company uses its excess cash to buy back its own shares, often referred to as "reinvestments" in the company. It also reduces the number of shares outstanding, resulting in benefits for those who already own shares in the company. However, this also means that the company does not invest more concretely in itself, for example by hiring more people or acquiring other companies, in addition to improving its finances.
The Wall Street Journal pointed out that this action is often taken by very large companies because their operations have reached a point where they have more cash available than the means and opportunity to invest in new things.
Share buybacks are not limited to energy companies.
Apple has a long history of buyouts. In November, Bloomberg reported that Apple had spent more than $550 billion buying its own stock since 2013, outpacing any other US company.
Senators Sherrod Brown (D-Ohio) and Ron Wyden (D-Oregon) have proposed higher taxes on buyouts and asked the Commerce Department to ensure that funds from the CHIPS Act incentive for semidoctors are not used for redemptions. But, as many have noted, a 1% tax is
In Warren Buffett's annual letter to shareholders, he argued for the positive nature of stock buybacks, at least when purchased at reasonable prices.
"When you're told that all takeovers are bad for shareholders or bad for the country, or especially good for CEOs, you're listening to either an economic illiterate or a silver-tongued demagogue (characters who don't exclude each other not mutually)" Buffett wrote in the letter.
Related: Warren Buffett Makes Over $120 Billion on Apple's $3 Trillion Milestone: 'It's Probably the Best Company I Know in the World'
As the New York Times' Dealbook noted, it was one of Buffett's shortest letters in decades and comes in the middle of what, on paper, looks like , to billions in losses for his investment firm Berkshire Hathaway amid a zig-zaggy market. (In the letter, Buffet says the company's fundamentals are still good, and he also said the number of losses is "misleading.")
Buffett is the chairman of Berkshire Hathaway, a huge investment company which, as he explains in the letter, has massive stakes in Apple, American Express and Coca-Cola. In the letter, he also included a few sentences about a tool often used by large companies in the public market: share buybacks.
This comes after President Biden said in his annual State of the Union address in January that Congress should quadruple the 1% tax on buyouts introduced by the Inflation Reduction Act . In particular, he attacked energy companies for takeovers and "rewarding their CEOs and shareholders", he said.
Exxon, for example, announced record earnings in 2022 and increased its plan from $30 billion to $50 billion in share buybacks over the next two years. Chevron announced a $75 billion share buyback program in January.
Related: Buffett's Next Bet Is One of His Biggest Ever
A stock buyback occurs when a company uses its excess cash to buy back its own shares, often referred to as "reinvestments" in the company. It also reduces the number of shares outstanding, resulting in benefits for those who already own shares in the company. However, this also means that the company does not invest more concretely in itself, for example by hiring more people or acquiring other companies, in addition to improving its finances.
The Wall Street Journal pointed out that this action is often taken by very large companies because their operations have reached a point where they have more cash available than the means and opportunity to invest in new things.
Share buybacks are not limited to energy companies.
Apple has a long history of buyouts. In November, Bloomberg reported that Apple had spent more than $550 billion buying its own stock since 2013, outpacing any other US company.
Senators Sherrod Brown (D-Ohio) and Ron Wyden (D-Oregon) have proposed higher taxes on buyouts and asked the Commerce Department to ensure that funds from the CHIPS Act incentive for semidoctors are not used for redemptions. But, as many have noted, a 1% tax is
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