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

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

With markets near record highs, here's what you should do with your portfolio

Markets have weathered geopolitical turmoil, hitting near record highs. Investors face tough decisions on valuations, asset concentration, and strategic portfolio rebalancing for risk control and future returns.

Latest Updates

Retirement

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

Shares

Boom, bubble or alarm?

After a stellar 2025 to date for equities, warning signs - from speculative froth to stretched valuations - suggest the market’s calm may be masking deeper fragilities. Strategic rebalancing feels increasingly timely.

Property

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Economy

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Shares

Is the iPhone nearing its Blackberry moment?

Blackberry clung on to the superiority of keyboards at the beginning of the touchscreen era and paid the ultimate price. Could the rise of agentic AI and a new generation of hardware do something similar to Apple?

Fixed interest

Things may finally be turning for the bond market

The bond market is quietly regaining strength. As rate cuts loom and economic growth moderates, high-quality credit and global fixed income present renewed opportunities for investors seeking income and stability. 

Shares

The wisdom of buying absurdly expensive stocks (or not!)

Companies trading at over 10x revenue now account for over 20% of the MSCI World index, levels not seen since the dotcom bubble. Can these shares create lasting value, or are they destined to unravel?

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.