Berkshire Hathaway Letters to Shareholders 1965-2012 by Warren Buffett

He was ranked as the world’s wealthiest person in 2008 and is the third wealthiest person in the world as of 2011. For shareholders and others who are interested, a book that compiles the full unedited versions of each of Warren Buffett’s letters to shareholders between 1965 and 2014 is available for sale at this link. The Rational Walk has published articles covering several of Mr. Buffett’s annual letters.

“As for the future, Berkshire will always hold a boatload of cash and U.S. Treasury bills along with a wide array of businesses,” Buffett wrote. In one of his letters, Buffett explained the differences between risk and volatility — and why it’s common for an investor to mix the two up. In his 2015 letter, Buffett said the prices of stocks will always be more volatile than a cash-equivalent asset. He added that in the long term, currency-denominated investments are much riskier than a widely diversified stock portfolio bought in the market over time. As for the future, Berkshire will always hold a boatload of cash and U.S. We will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses.

Berkshire has averaged a book value growth rate of 19.7% compounded annually from $19 per share in 1965 to $114,214 per share in 2012. Following these results is usually a discussion of how the change in intrinsic value is the metric that counts, but that book value is a conservative substitute that approximately tracks intrinsic value. Along the way, Buffett allows his shareholders tremendous insight not only into the internal affairs of Berkshire, but also into his thoughts on a vast array of material, ranging from corporate governance to dividend policy. In 2022, Berkshire Hathaway reported operating earnings of $30.8 billion. Its GAAP earnings, which are required to take into account fluctuations in the value of its stock portfolio, showed Berkshire lost $22.8 billion last year.

Berkshire Hathaway Letters to Shareholders (Paperback)

When companies are priced well, run well, and return capital well, it is Buffett’s belief that they should be encouraged to reinvest their profits, not just throw cash to shareholders in the form of dividends. If investors can do that, they’ll naturally tend to go in the opposite direction of the herd — to “be fearful when others are greedy and greedy only when others are fearful,” as he wrote in 2004. The second problem is that gaining a controlling ownership in a company often requires paying an above-the-market share price, known as a control premium. To solve this problem, conglomerates often manufactured the overvaluation of their stocks.

This is one of Max Olson’s many compilations of Berkshire Hathaway letters, going back to 1965. In his 2012 letter, Buffett gave a shout-out to Carol Loomis, a former editor-at-large at Fortune magazine and author of “Tap Dancing to Work.” She “has been invaluable to me in editing this letter since 1977,” he wrote. Although a millionaire by age 32, Buffett made 99.7% of his current income after age 52. He has berkshire hathaway letters to shareholders announced that he plans to give 99% of his wealth away to others. To date, his largest contribution has been to the Bill and Melinda Gates Foundation; other contributions have been towards efforts as diverse as endangered species protection, financial services for the poor, and sex trafficking prevention. Warren Buffett was born in Ohama, Nebraska, where he developed a love for business at a young age.

However, unlike Graham, Buffett takes a more qualitative approach to choose companies. Rittenhouse, a trust and valuation expert, outlines a system to measure organizational trustworthiness as a predictor of investment potential. Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ…Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing. This is the only authorized book with the full versions of the letters. On October 2, 2014, Berkshire Hathaway Automotive, an auto dealership subsidiary, was created through the acquisition of Van Tuyl Group, the remaining largest auto dealer in the nation and independently owned up to that date. It is the fifth-largest with ownership of 81 dealerships and revenues of $8 billion.

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He eats at McDonald’s and drinks “at least five 12-ounce servings” of Coca-Cola every day. Since 1965, the price of Berkshire’s Class A stock has increased by more than 2,800,000%. That’s compared to a roughly 23,000% increase in the overall gain of the S&P 500 over the same period. Among its most valuable holdings are its stakes in juggernauts of the American economy like Coca-Cola (9.3% stake) and Apple (5.4%) — its most valuable stake, with a market value of more than $120B.

At the time of purchase, Berkshire’s voting interest was limited to 10% of the company’s shares, but this restriction ended when the Public Utility Holding Company Act of 1935 was repealed in 2005. A major subsidiary of Berkshire Hathaway Energy is Northern Powergrid, which operates in the UK. Berkshire Hathaway Assurance – Berkshire created a government bond insurance company to insure municipal and state bonds. These types of bonds are issued by local governments to finance public works projects such as schools, hospitals, roads, and sewer systems. I’m a value investor but, I use swing trading techniques to manage my position sizes and risk.

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It is also detailed why this structure is adventageous, almost to a point where I’d want to buy a few shares. If I had completed the book earlier I would surely have bought some below 1.2 P/BV during the corona times. Warren Buffett is God at understanding capitalism, and dissecting businesses. Corporate Governance, Management Biases, Investment thesis, there is no one in the world that has more breadth of knowledge on Corporate America than Warren. Great learnings on analyzing balance sheets, P&Ls, Earnings, Cash-Flows, as well as building a definite and sound investment rationale. Warren Edward Buffett is an American business magnate, investor, and philanthropist.

Warren Buffett has not just a gift for capital allocation, but down-to-earth demeanor, attractive sense of humor, and uncanny ability to read people. There is so much to learn from this book which is a collection of shareholders letters written by Warren Buffett for the shareholders of Berkshire Hathaway. It took me a couple of months to finish it but it was really worth every minute I spent reading it. Buffett just doesn’t talks about investing, but also about business, life, ethics, accounting and many practical aspects of life.

And as Berkshire keeps repurchasing more of its shares, its shareholders will indirectly increase their ownership in Apple, BNSF, BHE, and other Berkshire-owned businesses. “If Charlie and I think an investee’s stock is underpriced, we rejoice when management employs some of its earnings to increase Berkshire’s ownership percentage,” he wrote in his 2018 letter. The company’s operations and underlying value are the only things that matters, to Buffett. That’s because thepriceof a stock, on any given day, is mostly dictated by the whims of “Mr. Market” (Buffett’s metaphor for the mercurial movements of the broader stock market). However, he argues that defining Berkshire as a conglomerate is only partially correct.

The Only Downside To The Berkshire Hathaway Annual Letters to Shareholders:

In 1977, Berkshire Hathaway purchased the Buffalo Evening News and resumed publication of a Sunday edition of the paper that had ceased in 1914. After the morning newspaper Buffalo Courier-Express ceased operation in 1982, the Buffalo Evening News changed its name to The Buffalo News and began to print morning and evening editions. In 2006, the company bought Business Wire, a U.S. press release agency. In November 2012, https://forexarena.net/ Berkshire announced they would acquire the Oriental Trading Company, a direct marketing company for novelty items, small toys, and party items. Dairy Queen, based in Edina, Minnesota, services a system of approximately 6,000 stores operating under the names Dairy Queen, Orange Julius, and Karmelkorn. The stores offer various dairy desserts, beverages, prepared foods, blended fruit drinks, popcorn, and other snack foods.

• Buffett’s advice is timeless, so it doesn’t even matter that much of what he wrote was written decades ago.
• With regard to his policy of concentrating his holdings, Buffett states that he feels that his risk is actually reduced by investing in companies with which he is familiar and fairly certain of their long term prospects.
• To put it simply, The Berkshire Hathaway Letters to Shareholders allow you to follow along with Warren Buffet from day 1.
• The approach of the more mature Buffett is to never invest in a company that can be a success if held for a short period of time.

And in his 2020 letter, Buffett goes on to explain that “conglomerates earned their terrible reputation” and why owning stocks in these businesses may not be the best investment strategy. New options grants increase the number of shares of a company, diluting the existing pool of shareholders and reducing the value of shareholders’ current holdings. That means Buffett’s share of that company is worth less than it was before — contrary to Buffett’s beliefs that managers should work to increase the value of his share of the company, not decrease it. He mocks himself for making mistakes, and sings the praises of Berkshire’s army of CEO-managers. He offers an investment philosophy grounded not in complicated financial analysis, but often in common sense evaluations of what a particular company is worth. It’s no wonder Buffett publishes an updated table of Berkshire’s per-share performance alongside the stock index at the beginning of each year’s shareholder letter, which has become an annual event in the world of business and finance.

Book Review of Berkshire Hathaway Letters to Shareholders by Warren Buffett

In 2012, American magazine Time named Buffett one of the most influential people in the world. Buffett is called the “Wizard of Omaha”, “Oracle of Omaha”, or the “Sage of Omaha” and is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth. Buffett is also a notable philanthropist, having pledged to give away 99 percent of his fortune to philanthropic causes, primarily via the Gates Foundation. As an alternative to paying dividends, the company chooses to reinvest profits into new projects, investments, share buybacks, and acquisitions. BRK.A shares have a five-year annualized return of 15.32%, while BRK.B shares have returned 15.38% per year over the same period, as of April 2022.

Berkshire emphasizes the former to an unusual – some would say extreme – degree. We are understanding about business mistakes; our tolerance for personal misconduct is zero. If you are new to reading investment books, English is not your mother tongue, and your Kindle has a tendency to discharge on its own, you are not in for a treat. It took me almost 4 years to finish, but I only recently developed what it takes to drag the finish line on the horizon – daily reading.

I actually really enjoyed reading each other, which further helped with the knowledge retention. For Buffett, however, who owns so many companies outright and intends to continue holding them for the long term, an outcome of “usually win, occasionally die” doesn’t make sense. But Buffett believes part of the answer lies with the compensation committees that determine the CEO’s pay package.

“When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue ,” Buffett wrote. At Berkshire Hathaway’s 2021 annual meeting, Buffett told shareholders what many had long suspected — Greg Abel, currently CEO of Berkshire Hathaway Energy, will succeed Buffett as CEO. Ben Graham said, “Day to day, the stock market is a voting machine; in the long term it’s a weighing machine.” If you keep making something more valuable, then some wise person is going to notice it and start buying. A second positive development for Berkshire last year was our purchase of Alleghany Corporation, a property-casualty insurer captained by Joe Brandon.

This is just Warren Buffet talking directly to you about the thing he loves most. His shareholder letters are not only educational and instructive – but kind of funny! Much of Berkshire’s early success came down to the intelligent use of leverage on relatively cheap stocks, as a 2013 study from AQR Capital Management and Copenhagen Business School showed. But Buffett’s main problem is not with the concept of debt — it is with the type of high-interest, variable-rate debt that consumer investors must take on if they want to use it to buy stocks. Berkshire reported an $11B write-down of its investment in the metal fabrication company Precision Castparts , as the pandemic brought aerospace manufacturing to a near halt, hurting some of PCC’s largest customers and pushing its shares down.

And if you’re only curious about Warren Buffet the shareholder letters are probably not for you. From 2010 to 2020, BNSF paid $41.8B in dividends to Berkshire, despite investing $41B in fixed assets. But the railroad company pays only what remains after it covers its needs and maintains a $2B cash balance. “This conservative policy allows BNSF to borrow at low rates, independent of any guarantee of its debt by Berkshire,” says Buffett. Buffett is a bigger advocate of buybacks than many other investors and neutral observers of the stock market. At Berkshire Hathaway’s 2004 meeting, he claimed that “when stock can be bought below a business’s value, it is probably the best use of cash” for a company.

The next year, he expanded to five partnerships, and then in 1959, he added a sixth one. Under his leadership, Berkshire Hathaway has acquired companies as diverse as GEICO, Dairy Queen, Fruit of the Loom, Benjamin Moore & Co., among others. Buffett essentially took the company from a small business to one of the world’s most successful corporations with a hand in nearly every sector of the economy. In 1965, Buffett took over as Chairman and CEO of Berkshire Hathaway, a role he still holds today.

The wider the moat was, the more effective it was for repelling attacks and protecting those inside the walls of the castle. The key to the value of Berkshire’s insurance subsidiaries is their ability to underwrite profitably. Buffett wrote See’s is “selling products that haven’t been materially altered in 101 years. What worked for See’s in the days of Henry Ford’s model T works now.” Nearly 7,000 transactions were completed at the See’s Candies booth at the Berkshire annual meeting last year, good for a pace of 10 sales per minute.

By 1995, he owned half of the company — and later that year, he arranged to buy the rest. At AOL, where shareholders had lost a total of 54.1%, CEO Steve Case came out with compensation totaling $164M. Again and again, at companies like Citigroup, Tyco, CMGI and others, CEOs made hundreds of millions while their shareholders faced heavy losses.