This weekend I had the pleasure of reading Warren Buffett’s annual shareholder letter (an annual exercise for me) and I wanted to share a section of the 23 page document with my readers. In it, Buffett discusses why he prefers share buybacks over dividends (Berkshire has never paid a dividend). Not only did he present a clear and concise explanation, but I also think it sheds much light into the current debate at Apple, where shareholders are hoping that management there finally makes some wise capital allocation decisions, as the stock hits a new 52-week low today. I have created a PDF file consisting of just the 3 page section on dividends versus buybacks if you would like to read it.
Archive for the ‘warren buffett’ category
Best Section of Warren Buffett’s Annual Letter to Berkshire Hathaway Shareholders: Why Buybacks Are Preferred Over DividendsMarch 4th, 2013
“A Minimum Tax for the Wealthy“ – By Warren Buffett (11/26/12 – NYTimes.com)
News of a $2 billion trading loss at JPMorgan Chase (JPM) last week prompted a 15% sell-off in the stock, which now sits more than 20% below its 52-week high, at a trailing P/E ratio of 8, at only a slight premium to tangible book value, and with a dividend yield above 3%. One of the best ways to be a successful investor is to buy quality companies at times when their share prices are temporarily depressed due to short term news headlines that likely will not impact the long term profit generation of the company. Warren Buffett has perfected this investment strategy over many decades. While JPM was not really on my radar before last week, the recent events at the company have changed that. At around $36 per share I think JPM makes for a very attractive long term investment. As a result, I have initiated a position in the company.
Full Disclosure: Long shares of JPM at the time of writing, but positions may change at any time