Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 163

CEO letters cut through the white noise

Company annual reports have come to resemble novels in size. In 2013, the average annual report required by the U.S. Securities and Exchange Commission was 42,000 words (up from 30,000 in 2000), due in large part to increased regulation and greater input from lawyers and accountants, putting many investors off or off to sleep.

The Wall Street Journal (paywall) recently reported that General Electric’s annual report was downloaded a mere 800 times and only a handful of people called investor relations with questions. Apparently it takes GE roughly two months to compile the report, requiring input from about 200 people, which in 2014 resulted in 103,484 words or 257 pages.

CEOs add a personal touch

While the annual report itself can be intimidating, CEO letters to shareholders can be inspiring and educational. The most famous of these is Warren Buffett’s Berkshire Hathaway letter, which is understandable given its exceptional quality. But there are some other great letters, written mainly by CEOs that are also upfront about their business risks and strategy.

In my opinion there is only one letter that comes close to Buffet’s – the one written by Amazon CEO Jeff Bezos. He doesn’t do many interviews so his letters are a must read if you want to understand how he thinks about his business. The 2015 letter contained this gem of a paragraph:

“One area where we are especially distinctive is failure. We are the best place in the world to fail [we have plenty of practice!], and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Most large organisations embrace the idea of invention, but are not willing to fail to get there. Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a 10% chance of a 100-fold payoff, you should take that bet every time. But you’re still going to be wrong nine times out of 10. If you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. In business, every once in a while, you can score 1,000 runs in one hit. Big winners pay for lots of experiments.”

Amazon’s cloud computing business (AWS) and free-shipping Prime service are the results of this ‘swing for the fences’ innovation. AWS reached $US10 billion in sales faster than any other enterprise software business. He also adds that "We want Prime to be such a good value, you’d be irresponsible not to be a member." It’s quite a statement. His customer-focussed approach remains the same every year, and he attaches a copy of his original letter from 1997 as a reminder that nothing has changed

Another letter I look forward to is from Bobby Kotak, the CEO of Activision Blizzard, the company behind games like Warcraft, Starcraft, and Call of Duty. It might seem strange to recommend a gaming company whose report has lots of pictures, but don’t hold that against them. Kotak is a fan of Buffett. He explains the ups and downs of the business and even compares his company’s performance to Buffett’s. Over the past 25 years, Kotak has grown Activision’s book value per share at the extraordinary rate of 30% annually, beating Berkshire.

Their opportunity is explained simply, gaming has become a sport and they plan to be the ESPN of gaming. In 2015, users spent 14 billion hours playing their games, up 16% year on year. This doesn’t include time spent watching people play games which was 30% more than all major sports leagues on TV combined in the US. In future, they believe they can generate extra revenues through sponsorships and broadcast rights.

Q&A format works well

An honourable mention goes to JP Morgan. Banks are famous for their lengthy disclosures, but its comprehensive question and answer letter format gives readers a better understanding of their business. CEO Jamie Dimon lays out potential business risks and also gives a great overview and insight into the global economy.

The annual report is being increasingly influenced by regulation. Thankfully, the annual letter helps set the tone. If the CEO can explain their strategy in an easy-to-read way and map out their long-term goals they will attract the right shareholders. As Warren Buffet says, “Either hold a rock concert or a ballet but don’t hold a rock concert and advertise it as a ballet.”

 

Jason Sedawie is a Portfolio Manager at Decisive Asset Management, a global growth-focused fund. Disclosure: Decisive’s fund holds Amazon shares. This article is for general purposes only and does not consider the specific needs of any individual.

 

banner

Most viewed in recent weeks

16 ASX stocks to buy and hold forever, updated

This time last year, I highlighted 16 ASX stocks that investors could own indefinitely. One year on, I look at whether there should be any changes to the list of stocks as well as which companies are worth buying now. 

UniSuper’s boss flags a potential correction ahead

The CIO of Australia’s fourth largest super fund by assets, John Pearce, suggests the odds favour a flat year for markets, with the possibility of a correction of 10% or more. However, he’ll use any dip as a buying opportunity.

2025-26 super thresholds – key changes and implications

The ABS recently released figures which are used to determine key superannuation rates and thresholds that will apply from 1 July 2025. This outlines the rates and thresholds that are changing and those that aren’t.  

Is Gen X ready for retirement?

With the arrival of the new year, the first members of ‘Generation X’ turned 60, marking the start of the MTV generation’s collective journey towards retirement. Are Gen Xers and our retirement system ready for the transition?

Why the $5.4 trillion wealth transfer is a generational tragedy

The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.

What Warren Buffett isn’t saying speaks volumes

Warren Buffett's annual shareholder letter has been fixture for avid investors for decades. In his latest letter, Buffett is reticent on many key topics, but his actions rather than words are sending clear signals to investors.

Latest Updates

Investing

Designing a life, with money to spare

Are you living your life by default or by design? It strikes me that many people are doing the former and living according to others’ expectations of them, leading to poor choices including with their finances.

Investment strategies

A closer look at defensive assets for turbulent times

After the recent market slump, it's a good time to brush up on the defensive asset classes – what they are, why hold them, and how they can both deliver on your goals and increase the reliability of your desired outcomes.

Financial planning

Are lifetime income streams the answer or just the easy way out?

Lately, there's been a push by Government for lifetime income streams as a solution to retirement income challenges. We run the numbers on these products to see whether they deliver on what they promise.

Shares

Is it time to buy the Big Four banks?

The stellar run of the major ASX banks last year left many investors scratching their heads. After a recent share price pullback, has value emerged in these banks, or is it best to steer clear of them?

Investment strategies

The useful role that subordinated debt can play in your portfolio

If you’re struggling to replace the hybrid exposure in your portfolio, you’re not alone. Subordinated debt is an option, and here is a guide on what it is and how it can fit into your investment mix.

Shares

Europe is back and small caps there offer significant opportunities

Trump’s moves on tariffs, defence, and Ukraine, have awoken European Governments after a decade of lethargy. European small cap manager, Alantra Asset Management, says it could herald a new era for the continent.

Shares

Lessons from the rise and fall of founder-led companies

Founder-led companies often attract investors due to leaders' personal stakes and long-term vision. But founder presence alone does not guarantee success, and the challenge is to identify which ones will succeed in the long term.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.