Billionaire Warren Buffett said critics of stock buybacks are “either an economic illiterate or a silver-tongued demagogue” or both, and all investors benefit from them as long as they are made at the right prices.
r Buffett (92) used part of his annual letter to Berkshire Hathaway shareholders on Saturday to tout the benefits of repurchases that fiery Wall Street critics like senators Elizabeth Warren and Bernie Sanders and many other Democrats love to criticise. The US government even added a 1pc tax on buybacks this year after they ballooned to roughly $1trn (€945bn) in 2022.
“When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive),” wrote Mr Buffett, who himself is a long-time Democrat.
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Investor Cole Smead said Washington DC should take note of Mr Buffett’s view on buybacks.
“Any politician, regardless of the aisle side, should stand up and be at attention to a statement like that,” said Mr Smead, who is with Phoenix-based Smead Capital Management.
Mr Buffett used his typical self-deprecating style to say Berkshire’s remarkable record of doubling the returns of the S&P 500 over the last 58 years with him at the helm is the result of only “about a dozen truly good decisions – that would be about one every five years”.
Mr Buffett pointed out how much Berkshire benefits from dividends that it receives from the huge investments in its portfolio like Coca-Cola and American Express, even though he refuses to pay a dividend at the Omaha, Nebraska-based conglomerate he leads because he believes he can generate a bigger return for shareholders by investing that cash.
Coke paid Berkshire $704m (€655m) in dividends last year and American Express added $302m (€285m), and those payments helped push the value of those stakes to $25bn (€24bn) for Coke and $22bn (€21bn) for American Express. Berkshire paid $1.3bn (€1.2bn) for each of those investments in the 1990s.
Mr Buffett said the key lesson for investors is that “it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.”