Berkshire Hathaway's (BRK.B 0.26%) (BRK.A 0.43%) 2019 shareholder is out. Written by famed investor Warren Buffett, the CEO and chairman of Berkshire, this letter and others like it are read carefully by investors all over the world.

Buffett is known for his wisdom when it comes to building wealth in business and equities. Of course, it's no wonder investors consider his words carefully. Berkshire Hathaway's stock price has appreciated at an average rate of 20.3% annually between 1965 and 2019. That compares with a 10% compound annualized gain for the S&P 500 (including dividends) over this same time frame. The different impact these two rates of returns have on capital is astounding: In total, Berkshire stock has risen by 2,744,062% since 1965, while the S&P 500 has gained 19,784%.

As investors turn to Buffett's latest letter for an update on Berkshire Hathaway and for financial wisdom, here's a look at several key takeaways to get you started.

Warren Buffett

Warren Buffett. Image source: The Motley Fool.

What Warren Buffett looks for in an investment

Buffett has certainly evolved over the years in some aspects. For instance, after initially preferring deep value stocks, the Oracle of Omaha has moved on to a preference for wonderful businesses at fair prices. Furthermore, he has opened up to the idea of investing in technology companies. Indeed, Berkshire's largest stock holding is Apple (AAPL 1.00%).

But the fundamental criteria that Buffett looks for in businesses -- whether those are businesses that can be bought in whole or through shares of publicly traded companies -- has remained generally the same for decades.

As Buffett details in his latest shareholder letter, he looks for three criteria:

First, they must earn good returns on the net tangible capital required in their operation. Second, they must be run by able and honest managers. Finally, they must be available at a sensible price.

Share repurchases make sense -- but only at the right price

One benefit of corporate excess cash is that it can be used to build shareholder value by paying dividends, reinvesting in the business, making strategic acquisitions, and even repurchasing shares.

Many companies often turn to share repurchases as a way to return capital to shareholders but unfortunately pay little attention to stock price when they are purchasing and retiring these shares. Buffett and Munger, however, remain committed to ensuring they repurchase shares only when the price makes sense.

"Over time, we want Berkshire's share count to go down. If the price-to-value discount (as we estimate it) widens, we will likely become more aggressive in purchasing shares," Buffett wrote. "We will not, however, prop the stock at any level."

In 2019, Berkshire repurchased about 1% of its shares throughout the year, paying prices which Buffett and Munger deemed "modestly favorable." Berkshire spent a total of about $5 billion on these repurchases.

Buffett is bullish on equities (with a caveat)

As always, Buffett refrained from economic forecasts, including interest rate speculation. But the Berkshire chairman and CEO did say that as long as interest rates remain near their current levels "it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments."

Of course, this view comes with a caveat:

That rosy prediction comes with a warning: Anything can happen to stock prices tomorrow. Occasionally, there will be major drops in the market, perhaps of 50% magnitude or even greater.

But even if this happens, Buffett said he is still confident that the "compounding wonders" of the stock market will make stocks a "much better long-term choice" over the long haul for investors willing to keep their emotions in check.