The Oracle of Omaha and Berkshire Hathaway’s Chairman Warren Buffett on Saturday released the annual letter to his shareholders alongside the company’s Q4 2019 earnings report. The company’s net earnings for 2019 full year attributable to Berkshire shareholders was $81.4 billion on the back of unrealised gains from its stock investments vis-a-vis $4.02 billion in 2018, according to the earnings’ release. For Q4 2019, the net earnings were $29.15 billion against a net loss of $25.3 billion for the year-ago period. The operating profit, nonetheless, declined from $24.7 billion in 2018 to $23.9 billion in 2019. The cash held for the year was $128 billion. Here are four key takeaways from Buffet’s annual letter:

Succession Plan

Warren Buffett, 89, said the company is 100 per cent prepared for his and his 96-year old partner Charlie Munger’s departure. “Charlie and I long ago entered the urgent zone. That’s not exactly great news for us. But Berkshire shareholders need not worry: Your company is 100% prepared for our departure,” he said. Buffett said his will directs the successors including trustees not to sell any Berkshire shares along with absolving both the executors and the trustees from liability for maintaining “what obviously will be an extreme concentration of assets.”

Investment Criteria

Buffett also disclosed his investment criteria in new businesses. First, businesses must earn good returns on the net tangible capital required in their operation. Second, they must be run by “able and honest managers” and third, they must be available at “a sensible price.” The preference is always to buy them completely but “the opportunities to make major acquisitions possessing our required attributes are rare,” he said.

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Stocks vs Bonds

According to Buffett, until interest rates and corporate tax rates remain low, stocks will continue to outperform bonds. “If something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low-level businesses now enjoy, it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments,” he said. However, this comes with a warning —  Anything can happen to stock prices tomorrow. Occasionally, there will be major drops in the market, perhaps of 50 per cent magnitude or even greater. Despite this, Buffett said “the compounding wonders” of the market will “make equities the much better long-term choice.”

Share Buyback

Stock repurchase for Buffett happens only at the price that’s favourable. This means that buyback will happen only if “Charlie and I believe that it is selling for less than it is worth” and “the company, upon completing the repurchase, is left with ample cash,” he said. Buffett added that he wants Berkshire’s share count to go down ahead but he will not “prop the stock at any level.” Berkshire had repurchased around 1% of shares for $5 billion during which the company’s price was deemed “modestly favourable.”