Buffett’s 1977 Shareholder Letter
1. Business Performance & Capital Allocation
• 📌 Focus on Return on Equity (ROE), not just earnings per share.
• 💰 Every $1 of retained earnings should generate at least $1 in market value.
• 🎯 Rational capital allocation for long-term gains.
2. Insurance Business Insights
• 🏦 Insurance float as a source of cheap investment capital.
• ⚠️ Underwriting discipline is key—avoid underpricing risks.
• 📊 Risk-based pricing to ensure profitability.
3. Stock Market & Investment Philosophy
• ⏳ Long-term investing beats short-term speculation.
• 📉 Market fluctuations create opportunities, not risks.
• 🏛️ Invest in strong businesses at reasonable prices.
4. Focus on Economic Moats
• 🚧 Competitive advantages matter (brand strength, pricing power, low capital needs).
• ⚒️ Avoid industries with heavy regulation or commodity risks.
5. Shareholder-Friendly Approach
• 🤝 Treat shareholders as partners.
• 🚫 No stock splits—they don’t add value.
• 📢 Transparent communication in annual reports.
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