Warren Buffett quietly boosted his Japan bets, warned about Fed rate hikes, and defended his tax contributions. Here are 12 key insights from his annual letter.

• Warren Buffett called out fishy accounting and quietly warned about rate hikes in his annual letter.
• Berkshire boosted its Japan bets, and signaled it can weather inflation and climate-change pressures.

Warren Buffett's latest letter to Berkshire Hathaway shareholders contained plenty of nuggets for close followers of the investor and his company.

Buffett blamed the stock-market boom for a surge in deceptive accounting, and assured investors that Berkshire would deal with higher interest rates and do its part to combat climate change. He also defended the conglomerate's tax contributions, and emphasized he doesn't buy stocks based on short-term price action, after facing related controversies over the past year.

Moreover, the Berkshire CEO quietly added to his Japanese holdings, highlighted his two deputies' growing responsibilities, and hinted he's finding stock buybacks less appealing today.

Here are 12 key takeaways from Buffett's letter:

1. Betting on Japan

Berkshire revealed it boosted its Itochu, Mitsui, and Mitsubishi stakes by 8% to 10% last year. The three Japanese trading houses ranked among Berkshire's 15 most-valuable holdings on December 31; only Itochu was on the list a year earlier.

2. Misleading profits

"Bull markets breed bloviated bull," Buffett declared, referring to a spike in dubious adjustments to corporate earnings as stocks have soared in recent years. His comment suggests he's worried about the amount of greed, speculation, and deception in markets.

3. Soaring shares

Berkshire's stock price jumped nearly 30% in 2021, outstripping the S&P 500 and notching its second-best annual performance since 1998.

4. Delegating responsibility

Buffett disclosed that his two portfolio managers, Todd Combs and Ted Weschler, oversaw $34 billion of investments at the end of 2021, up from $21 billion five years earlier. They were also responsible for several of Berkshire's 15 most-valuable holdings, the investor noted.

5. Insuring against inflation

Berkshire's key insurance business should post higher revenue as the economy grows and prices rise, Buffett predicted in his letter on Saturday. He likely wanted to reassure shareholders that his company can navigate historic inflation.

6. Weathering climate change

Buffett noted that Berkshire's BNSF railroad provides a far more environmentally friendly way to transport goods than using scores of trucks. The investor also pointed out that Berkshire Hathaway Energy has become a leading provider of renewable-energy production and transmission, and has used all of its profits to fund "climate-conscious moves."

The Berkshire chief was likely responding to criticism of his company's involvement in the fossil-fuel industry, and pressure to be more transparent about its carbon footprint.

7. Paying a fair share

Berkshire paid $3.3 billion in federal income tax in 2021, representing almost 1% of the total corporate income tax collected by the Treasury last year, Buffett said. He also noted the company pays significant state and foreign taxes.

Buffett was likely responding to backlash over his taxes, sparked by a ProPublica investigation last summer. He pointed out that Berkshire paid a total of $337,000 in taxes over the nine years before he took over the company, or a "pathetic" $100 a day, whereas now it contributes the equivalent of $9 million a day.

8. Backing off from buybacks

Berkshire spent about $52 billion to purchase 9% of its outstanding shares over the course of 2020 and 2021, Buffett noted. Yet his company has only spent $1.2 billion on stock buybacks this year as of February 23, signaling he's finding Berkshire shares less enticing after their roughly 7% rise since the start of January.

9. Investing, not trading

"Charlie and I are not stock-pickers; we are business-pickers," Buffett wrote, adding that Berkshire invests based on how it expects a company to perform in the long run, not in anticipation of short-term market moves.

He was likely nodding to claims that Berkshire bought $1 billion worth of Activision Blizzard stock last quarter because his team knew Microsoft was planning to acquire the video-games giant. Buffett has roundly dismissed the conspiracy, noting 85% of the stake was purchased in October — about three months before the merger was announced.

10. Rates matter

Buffett quietly warned investors about the Federal Reserve's planned rate hikes this year.

"Interest rates will always be important," he said, emphasizing they affect the prices of all productive assets including stocks, apartments, farms, and oil wells.

11. Cash to deploy, nothing to buy

Buffett, who has been starved of bargains in recent years, may be preparing to deploy some of Berkshire's vast cash reserves. Berkshire held $45 billion in cash and cash equivalents, and $90 billion in longer-term Treasury bills, at the end of 2020; that ratio shifted to $85 billion and $59 billion by the end of last year.

Moreover, Buffett noted that as of December 31, $120 billion of Berkshire's $144 billion cash pile was invested in Treasury bills maturing in less than a year. The investor also emphasized that he likes to keep 100% of his net worth invested in businesses, and assured shareholders that Berkshire's cash-heavy periods are never permanent.

12. Bullish on Apple

Buffett has faced calls to trim his 5.6% stake in Apple, which has more than tripled in value and now makes up over 40% of the total value of Berkshire's stock portfolio.

However, Buffett praised Apple CEO Tim Cook in his letter, and trumpeted the iPhone maker as Berkshire's number-two "giant" after its insurance business, signaling he won't be slashing the position anytime soon.