Dear Shareholder
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Dear Shareholder is a curated collection of the most insightful passages from some of the greatest shareholder letters ever written.
It showcases timeless business, investing, and leadership wisdom from legendary CEOs like Warren Buffett, Prem Watsa, and other top-tier managers.
The letters explore topics such as long-term thinking, corporate culture, core values, capital allocation, buybacks, dividends, and more.
🧠 Key Takeaways
A company with revenue coming from all around the world isn’t just protecting itself against a weak quarter in one region or a recession in another—it’s building a layer of resilience (and therefore, a competitive advantage) that’s hard to replicate.
Brand strength isn’t a pool to be drained—it’s a reservoir that must be continuously replenished. Otherwise, the perks that come along with it—pricing power, customer trust, and multigenerational loyalty—will lose their power over time.
Great outcomes start with great inputs. For investors, great returns start with owning great businesses.
Prices go up and down based on how people feel about them on any given day—not because the underlying fundamentals of the business suddenly changed. And these feelings usually have more to do with things happening in the news or recent price action than anything actually happening inside the company.
Investing isn’t about constantly switching strategies or chasing whatever’s working right now. It’s about finding an approach that aligns with your goals—one you can stick with through both the highs and the lows.
There are tons of small, specialized companies that can sneakily generate great returns, and the world has room for a lot more of those than the giants we always hear about.
If you want a high-quality business, you need a high-quality product. When you have that, everything else gets easier because a great product practically sells itself.
Anyone can look good over a one-year period if luck is on their side. But over the long term, luck fades and only sound principles remain.
The stock market—and people in general—hate uncertainty. That’s why earnings guidance exists: it gives investors an idea of what to expect going forward. But the downside is that guidance can create arbitrary expectations that a company feels pressured to meet, even when those expectations don’t reflect the underlying realities of the business.
In business and life, intentional maintenance beats reactive repair every time.
“Where does our fundamental strength come from? It comes from the geographically diversified nature of our various operating units. By this, we mean that a downturn in some markets is almost invariably offset by the strength of others.”
A company with revenue coming from all around the world isn’t just protecting itself against a weak quarter in Brazil or a recession in Europe—it’s building a layer of resilience (and therefore, a competitive advantage) that’s hard to replicate.
In Coca-Cola’s case, this geographic diversification also created a powerful feedback loop. Cash from strong markets was able to fuel growth in weaker ones.
And it didn’t just treat developed regions as cash cows—it also used them as training grounds, where the company could test and refine its playbook before applying those lessons in newer, underdeveloped markets.
Over time, the combination of these two things—the resilience and reinvestment enabled by the global flywheel—translates into better long-term returns with less risk along the way.
“The true worth of a trademark is best measured by its effectiveness in the marketplace, not by a calculation on the balance sheet. Our people understand that brand strength is not a pool to be drained, but a reservoir that must be continuously replenished to new levels. We view every daily task as an opportunity to build additional value into Coca-Cola and the other trademarks in our stable of brands.”
You can’t put a price on a good reputation. It sounds like Coca-Cola understood that better than most.
As Goizueta put it, brand strength isn’t a pool to be drained—it’s a reservoir that must be continuously replenished. In other words, a strong brand isn’t something you can just build once and forget about.
While it is a competitive advantage, it has to constantly be nurtured and reinforced to remain one. Otherwise, the perks that come along with it—pricing power, customer trust, and multigenerational loyalty—will lose their power over time.
“In sports, coaches can only be as good as their players. In business, the same holds true, as managers can only be as good as their businesses. Eager to be worthy managers of your investment, we purposefully narrowed our lines of business to those that would inherently make us shine.”
There’s a saying in health and fitness: you can’t outtrain a bad diet. And as it turns out, you can’t outmanage a bad business either.
In other words, no amount of managerial brilliance can fully overcome a fundamentally weak business. So rather than trying to fix underperforming areas, you’re better off focusing on the parts that are already strong since those give you the best chances of success.
To boil it down into one sentence: great outcomes start with great inputs. For investors, great returns start with owning great businesses.
“Many have suggested that the crash in October could lead to a depression. Can this be 1929 repeated all over again? Unfortunately, we don’t know the answer to these questions. What we do know is that short term fluctuations in the market have always resulted from the twin emotions of fear and greed and have nothing to do with the underlying business fundamentals of the country or company.”
We’ve covered this idea at length, but short-term movements in share price are almost always driven by human emotion. Because of that, they are impossible to predict.
Prices go up and down based on how people feel about them on any given day—not because the underlying fundamentals of the business suddenly changed. And these feelings usually have more to do with things happening in the news or recent price action than anything actually happening inside the company.
“The focus on quarterly growth accentuated by quarterly conference calls has made the current stock market hypersensitive to short term results. It appears that most participants in the market are focused on forecasting the daily weather patterns whereas we like focusing on seasons. We know winter will end (about time in Toronto!) and spring will come, followed by summer. We just do not know the exact date and we may get some spring snowfalls! But just as seasons repeat, we expect our style of value investing will again come to the fore and will again be very profitable for our shareholders.”
No matter what kind of investor you are, your particular strategy—or the stocks you own—won’t be in favor all the time.
Momentum investors, value investors, dividend investors, day traders—they all have their moments in the sun. And they all go through cold spells as well.
But investing isn’t about constantly switching strategies or chasing whatever’s working right now. It’s about finding an approach that aligns with your goals—one you can stick with through both the highs and the lows.
For me, that’s investing in dividend-paying stocks. I know there will be times when my portfolio underperforms in the short term, and other times when it does really well. But I think investing is about more than just how my stocks move up and down at any given moment.
A big part of how I measure progress in my portfolio is by the amount of passive income it generates—which, for the most part, has nothing to do with what the share price is doing. My ultimate goal is to build a portfolio that delivers respectable returns and a reliable, growing stream of passive income because one day, that income will help pay my bills.
How much income is coming in? How is it growing? How close am I to having it cover all of my expenses? These are the questions I care about.
And that income component (measured against my own needs) is exactly why I’ve always questioned the idea that total return (measured against the market) is the only thing that matters. I’m not saying it doesn’t matter, but it isn’t everything.
My thought is that if your strategy is built around generating sustainable, growing income (with huge emphasis on both sustainable and growing), then short-term price movements or underperformance don’t necessarily mean you’re on the wrong track.
At the end of the day, your investing strategy should align with your goals. And, as soon as possible, you should define what your goals actually are.
Don’t worry about what other people say you should shoot for—whether it’s total returns, dividend income, or anything else. What do you actually want from your portfolio? Why are you investing in the first place?
Personally, I’m okay with lagging the market from time to time. I’m also completely fine with outperforming it now and then. Over the long haul, both will happen.
As long as wealth is being built, my income is growing, and I’m making progress toward the goals I’ve set, that’s a win in my book. What more could you ask for?
“We search for niches, not dominance, on the theory that the world can tolerate many mice but few elephants.”
I took this as a slight jab at the obsession with only investing in the biggest, most dominant players. The GOOGLs, AMZNs, and MSFTs of the world.
What they’re really saying is that they prefer businesses that don’t need to be giants to be successful. There are tons of small, specialized companies that can sneakily generate great returns, and the world has room for a lot more of those.
In other words, it’s their way of saying, “Don’t underestimate the compounding power of businesses that aren’t sexy, dominant, or in the spotlight.”
Personally, this way of thinking really resonates with me. Part of the fun of investing, at least for me, comes from finding those hidden gems no one’s paying attention to. It’s like you’re discovering this big secret—it’s the reward of the hunt.
That’s why my portfolio consists of stocks like WSM and ZTS—and why I’ve got my eye on companies like ROL and MSI. These are sneaky compounders!
Not to mention, at this point, I’m honestly getting tired of having the same old names shoved down my throat and being made to feel like I’m missing out or doing something wrong if I don’t own them. That only makes me want to lean even harder into these smaller, under-the-radar businesses just to prove a point.
It’s like being a watch collector and only buying Rolex. Nothing against Rolex—they make great watches. But there are so many other brands worth exploring like Bulova, Seiko, and Timex—and don’t even get me started on the microbrands.
The same goes for investing. You should own the businesses that actually resonate with you, and you should know that it’s okay to look past the giants.
Once you do, you’ll find there are tons of great opportunities out there, many of which most investors have never even heard of.
“In the venture capital business, where we began our careers, we developed the belief that the science is in investing and the art is in the selling. Art in the sense of the ineffable human ability to collect and integrate vast amounts of unrelated information and in some mysterious way arrive at an opinion as to whether to hold or to sell.”
When it comes to buying stocks, the research tends to follow a tangible, systematic process. That’s why buying often feels more like a science.
However, when it comes to selling, sometimes you just get this feeling you can’t ignore. Something in your gut just doesn’t sit right.
You start noticing some red flags with a company you own. Maybe something in the earnings calls feels off over time, maybe you start to see cracks in the fundamentals, or maybe the growth story isn’t playing out like you thought it would.
Whatever it is, eventually those red flags pile up to the point where you have to face them. When that happens, sometimes the best move is to just cut and run.
“Our focus on increasing intrinsic value in the long-term has an important qualifier: We believe in publishing a high-quality Washington Post and Newsweek. The newspaper’s and the magazine’s staffs both understand (and history has proven) that they must be successful businesses in order to maintain quality. But we believe in the importance of what these businesses do, and we believe that to some degree better journalism will also result in a better long-run business.”
The idea here is incredibly simple, and it applies to every business: if you want a high-quality business, you need a high-quality product. When you have that, everything else gets easier because a great product practically sells itself.
You don’t have to rely as much on marketing because people will naturally talk about it. You gain pricing power because people are happy to pay more for something that’s genuinely worth it.
Plus, if you can consistently deliver a product with unmatched quality, you’ll earn loyal customers who trust you and will stick around for the long haul.
“While we are delighted to discuss 2006, we recognize that in any one year fortuitous timing (good luck) influences our results, just as much as, if not more than, our fundamental business discipline. Over longer time horizons, however, the effect of timing fades away. It is superseded by sound business principles and skilled application, which becomes evident only with the passage of time. These facts help, in part, to explain why we focus on long-term measures at Markel. Anyone, including us, can get lucky in the short-term. However, over 10, 20, or more years, only companies with skill and discipline can consistently produce value for their shareholders.”
The first thing this reminds me of is Ben Graham’s classic quote: “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.”
In other words, anyone can look good over a one-year period if luck is on their side. But over the long term, luck fades and only sound principles remain.
Sticking with the weighing machine analogy, your goal as an investor is to own businesses that get heavier over time.
“We believe that a fundamental measure of our success will be the shareholder value we create over the long-term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.”
At its core, greater market leadership means more customers. And the more customers Amazon has, the more powerful its economic model becomes.
That’s because Amazon is built around economies of scale, which is a flywheel that builds on itself over time. More customers drive more volume, which lowers costs. Those savings are then passed on to customers through lower prices, which attracts even more customers. And the cycle repeats.
As that flywheel gains momentum, Amazon grows more efficient. Costs go down, margins get better, and returns on invested capital go up.
“We are firm believers that the long-term interests of shareholders are tightly linked to the interests of our customers: if we do our jobs right, today’s customers will buy more tomorrow, we’ll add more customers in the process, and it will all add up to more cash flow and more long-term value for our shareholders.”
As discussed in the previous quote, more customers lead to greater scale. This allows Amazon to lower prices—which obviously benefits customers—but that same scale dynamic also drives more revenue, profits, and free cash flow.
And because the business becomes more efficient with scale, returns on invested capital improve as well. So by relentlessly focusing on creating value for the customer today, Amazon is setting the stage for long-term shareholder value tomorrow.
In other words, what’s good for the customer today ends up being good for the shareholder too.
“Earnings guidance seems unnecessary because the market will simply adjust its company valuation once we report our actual results. At the same time, earnings guidance has the potential to create questionable incentives for running the business. We don’t want to encourage our management team to simply ‘make the numbers’ and possibly make decisions that don’t help build shareholder value over the long haul.”
The stock market—and people in general—hate uncertainty. That’s why earnings guidance exists: it gives investors an idea of what to expect going forward.
But the downside is that guidance can create arbitrary expectations that a company feels pressured to meet, even when those expectations don’t reflect the underlying realities of the business.
In trying to “make the numbers,” management might be tempted to prioritize short-term performance over long-term development. That can lead to decisions that are shortsighted at best—or, in some cases, unethical or even illegal.
“While it feels good to have no debt, I won’t say we will never borrow money. If we did, it would be a modest amount, and we would use the funds to take advantage of an outstanding opportunity. We’re already successful, and we don’t need to push our capital structure to the limit. I prefer to run Morningstar the old-fashioned way—living within our means and using our cash flow to buy companies, for organic expansion, or perhaps eventually to pay a dividend or buy back stock.”
I really admire Joe’s perspective here: the company is already successful, so there’s no need to chase extra growth by loading up on leverage.
That kind of discipline is rare in the corporate world, where there’s constant pressure to maximize growth at all costs. While I do understand where that pressure comes from, giving in to it can lead to reckless decisions.
Joe’s mindset of “we’re growing, and that’s enough” is exactly the kind of long-term thinking more businesses could benefit from. This is actually the same exact mindset I have toward my YouTube channel.
“Our favourite and most frequent acquisitions are the businesses that we buy from founders. When a founder invests the better part of a lifetime building a business, a long-term orientation tends to permeate all aspects of the enterprise: employee selection and development, establishing and building symbiotic customer relationships, and evolving sophisticated product suites.”
Founders obviously pour their blood, sweat, and tears into their businesses. A lot of them put their entire lives on the line to get it off the ground, with no safety net and no plan B.
Because of that, there’s an innate sense of imperative survival. The business has to make it. There’s no other option. This is it.
I think that’s part of why founder-led businesses often have such a strong long-term orientation. It’s that—but it’s also because the business is an extension of themselves.
It came from the inner workings of their mind. And because it’s part of them, they probably started it with the intention—consciously or not—to do it forever.
“Running a company for the long term is like driving a car in a race that has no end. To win a long race, you must take a pit stop every now and then to refresh and refuel your car, tune your engine and take other actions that will make you even faster, stronger and more competitive over the long term.”
In my opinion, this quote is really about the importance of maintenance—something we don’t often think about, especially when it comes to business.
Maintenance, as opposed to repair, lets you catch small issues before they become big ones. It gives you the chance to fine-tune what’s already working, correct what isn’t, and keep the whole machine running smoothly.
Running something into the ground and waiting until it breaks usually costs more. Plus, it takes longer to fix and can cause you to lose ground if it doesn’t completely take you out of the game.
Put simply: in business and life, intentional maintenance beats reactive repair every time.
Dear Shareholder is a curated collection of the most insightful passages from some of the greatest shareholder letters ever written.