 Good day, fellow investors. Something that I really enjoy reading are Buffett's Letter to Shareholders and today we'll summarize 1977 Letter to Shareholders that is a very, very important letter filled with investing knowledge and advice. The key discussion topics will be return on equity, growth and value, and growth and value go hand in hand, investing mistakes, focus on business returns, hope stock prices stay low or go down. So let's start with what is key for Buffett return on equity, which means you have to check the quality of the reported earnings. Return on equity is key for Buffett. It's also logical to be so. You look at what you did with what you have. To quote Buffett, since businesses customarily add from year to year to their equity base, we find nothing particularly noteworthy in a management performance combining, say, a 10% increase in equity capital and the 5% increase in earnings per share. Buffett believes the most realistic measurement for management performance is return on equity capital. The equity capital is the book value one is working with, and that is exactly the reason why Buffett always focuses on book values. The return on equity, what you are using, is what determines your long-term returns and not the stock price movements, as we will see later when Buffett is saying that lower stock prices are actually what you should hope for. A difficult concept to grasp, but bear with me and Buffett. Second point of the letter is that growth and value go hand in hand. Berkshire was actually a growth stock. Buffett entered the insurance industry in 1967 when he bought National Indendity for 8.5 million and the insurance premium was 22 million. 10 years later, in 1977, the insurance premium had grown to 151 million, the growth was achieved by growth in the business they acquired, and by the new companies they started. So they started a lot of new companies, Cornhusker Casualty Company in 1970, Lakeland Fire, the insurance company of Iowa, Kansas Fire, other purchases of companies, etc. And we might say that Berkshire in the 1970s was actually an insurance startup, not the conglomerate we are looking at. So the huge returns come from new businesses, new investments that made Buffett what he is. The third point of the letter is growth leads to mistakes, investing leads to mistakes, and that is good as long as you manage to live another day. Buffett certainly made his investing mistakes, many attack him for that, but as long as you go forward while making mistakes, things will be fine. Therefore, Buffett prefers and advises to invest in businesses with a strong tailwind. Some major mistakes have been made during the decade from insurance, however, it's comforting for Buffett to be in a business where some mistakes can be made and yet a quite satisfactory overall performance can be achieved. Something very important, he says, is the importance of being in businesses where tailwinds prevail rather than headwinds. This leads me to think about the tailwinds in the current investing environment. There is the renewables and electric revolution, data with 5G, social media, online commerce, global travel and global development, especially in emerging markets. Finding margin of safety, value investments that are exposed to those and other positive trends will make your investing journey much easier. Focus on business returns, not stocks, that's the key with Buffett. Almost all fund manager letters that you read start with their performance in relation to the stock market. If their stocks in previous months went up, they will show their monthly performance, if not, they will show something else. However, Buffett does the opposite. He starts with his return on equity coming from the businesses and then only mentions his 74 million unrealized gain from Berkshire's stock portfolio somewhere in the middle of the letter, telling readers not to take it seriously because it doesn't really matter. Just three years back, he mentions, there was a 17 million loss. As he intends to hold his positions for many years because it is the business that delivers the returns, not the stock market, he really doesn't care about stock market prices. Actually, he hopes stock prices stay down for longer so that he can buy more of the company as every position he holds is considered like an investment in the whole company. How would Berkshire look today if he would have sold his core positions like Geico or Washington Post just because the stock price was up two or three times? An interesting company from this list to follow will be the interpublic group of companies. It's not a publicized holding by Buffett, but it did pretty well over time. We will see what did Buffett do with it through time. He bought that a few years prior to this letter and the position has already quadrupled. Over the following 20 years from 1979 to 1999, it increased another 100 times despite the quadrupling since Warren Buffett bought. So since he bought till 1999, it increased 400 times. Crazy example. So this example shows that you have to keep stocks for the long term, but you have to hope stock prices to go down, especially in the short term while you're accumulating. So Buffett slightly changed his key purchasing criteria by removing the private owner yardstick that we quoted. Purchased price attractive when measured against the yardstick of value to private owner and later he added, he changed that by adding a very attractive price in general. So he looks for very attractive prices and the second part of this figure is crucial. Buffett doesn't care about stock price movements in the short term. Just the business experience. He actually welcomes lower market prices of stocks he owns because you can acquire to quote more of a good thing at a better price. Investing is as simple as that. I wonder why 99% of the investing population is happy when stocks go up. We should be happy only when stock prices go down as our long term return on capital increases because the earnings yield and the dividend yield increase when stock prices are lower. And we can buy more of a good thing for less by reinvesting our free capital, think about dividends, think about paychecks and achieve better returns. To conclude, the more I read Buffett letters, the more I think how investing is inherently easy. You have to simply forget about the stock market, look at business returns, wait for an attractive price in a positive economic trend and then buy big. That's the secret of investing. Some would say it can be compared to the secret of losing weight, eat less and exercise more. Similarly to investing, a simple truth that few adhere to. Why? Well, I'll let you ponder over it. Please subscribe to my weekly newsletter that will just give you an overview of the content produced during the week so that you don't miss special stock analysis small caps that I don't do videos on. Thank you for watching and looking forward to see you in the next video.