Here are the biggest takeaways from Warren Buffett s annual letter

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Warren Buffett, the chairman and CEO of Berkshire Hathaway, released his annual letter to shareholders on Saturday alongside the company's fourth quarter 2019 earnings report.

In the letter, Buffett discussed share buybacks, his death, and Berkshire Hathaway's acquisition strategy going forward.

Here are the biggest takeaways from the letter.

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It's an exciting day for Berkshire Hathaway shareholders and the broader investment community: Warren Buffett has released his annual letter to shareholders alongside the company's fourth-quarter earnings report.

The letter, which Buffett has penned for decades, gives a glimpse into company operations, performance, and strategy, as well as an inside look into what the "Oracle of Omaha '' has been thinking about in the past year.

This year's letter was 14 pages long and boasted quotes from economists such as Edgar Lawrence Smith and John Maynard Keynes. In it, Buffett lamented about the "fickle stock market," "rare" opportunities for buying companies, and the role of boards of directors. He also discussed some plans for his and vice chair Charlie Munger's death, and gave a hint about succession plans.

Buffett also exhibited his usual flourish for humor and wisdom in the letter. In discussing the attributes of a board of directors, he wrote, "if I were ever scheduled to appear on Dancing With the Stars, I would immediately seek refuge in the Witness Protection Program."

He continued: "We are all duds at one thing or another. For most of us, the list is long. The important point to recognize is that if you are Bobby Fischer, you must play only chess for money."

In 2019, Berkshire Hathaway stock posted its worst underperformance of the broader market in a decade, and have gained 1.1 this year through Friday's close. Buffett again failed to make a major acquisition for Berkshire Hathaway. In the absence of a large company purchase, Berkshire Hathaway bought back a record 2.2 billion of its stock in the fourth quarter. Over the entire year, the company spent 5 billion on repurchasing its own stock.

The company posted net earnings of 29.2 billion in the year, up from a loss of 25.4 billion a year earlier when the company had to take a major write-down on its investment in Kraft Heinz Co. Operating earnings fell 23 in 2019 to 4.4 billion. Berkshire Hathaway's record cash pile was 128 billion at the end of 2019, down only slightly from 128.2 billion at the end of the third quarter.

Here are the main takeaways from Warren Buffett's annual letter to Berkshire Hathaway shareholders.Accounting rules

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The first letter of Buffett's report was dominated by his thoughts on GAAP accounting rules. In 2019, the company earned 81.4 billion, broken down into 24 billion of operating earnings, 3.7 billion of realized capital gains and a 53.7 billion gain from an increase in the amount of net unrealized capital gains that exist in the stocks we hold. Each of those components of earnings is stated on an after-tax basis.

The 53.7 billion gain comes from the GAAP accounting rule that went in place last year.

"As we stated in last year's letter, neither Charlie Munger, my partner in managing Berkshire, nor I agree with that rule," Buffett wrote.

He continued: "The adoption of the rule by the accounting profession, in fact, was a monumental shift in its own thinking. Before 2018, GAAP insisted with an exception for companies whose business was to trade securities that unrealized gains within a portfolio of stocks were never to be included in earnings and unrealized losses were to be included only if they were deemed "other than temporary." Now, Berkshire must enshrine in each quarter's bottom line a key item of news for many investors, analysts and commentators every up and down movement of the stocks it owns, however capricious those fluctuations may be."

Stock buybacks

REUTERS Rick Wilking

Berkshire Hathaway's annual report, released the same day as the letter, showed that the company repurchased a record 2.2 billion of its own stock at the end of the year, up from 700 million in the previous quarter. That brings the total the company spent on stock buybacks to 5 billion over the year.

"Over time, we want Berkshire's share gown to go down," Buffett wrote. "If the price-to-value discount as we estimate it widens, we will likely become more aggressive in purchasing shares. We will not, however, prop up the stock at any level."

Berkshire Hathaway loosened its rule around share buybacks in 2018 making it easier for Buffett and Munger to authorize buybacks when the repurchase price is "below Berkshire's intrinsic value," according to the company. Still, in previous quarters, analysts thought that the company could've spent more on share buybacks.

Boards of directors

Kevin Lamarque Reuters

Buffett also discussed the compensation and purpose of corporate boards over the last few years, a "hot topic."

"Over the years, many new rules and guidelines pertaining to board composition and duties have come into being. The bedrock challenge for directors, nevertheless, remains constant: Find and retain a talented CEO possessing integrity, for sure who will be devoted to the company for his her business lifetime. Often, that task is hard. When directors get it right, though, they need to do little else. But when they mess it up,......" he wrote.

He continued: "At Berkshire, we will continue to look for business-savvy directors who are owner-oriented and arrive with a strong specific interest in our company. Thought and principles, not robot-like "process," will guide their actions. In representing your interests, they will, of course, seek managers whose goals include delighting their customers, cherishing their associates and acting as good citizens of both their communities and our country."

See the rest of the story at Business InsiderSee Also:Matthew Dent grew his fund's assets by 27 in just one year. He breaks down which company is the 'next Berkshire Hathaway' and shares 4 other top stock picks.10 stocks the market's best-performing hedge funds are piling into right now and 9 more they're buying for the long haulMORGAN STANLEY: Buy these 25 non-Tesla stocks to cash in on the electric-car revolution

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