Shareholder Letters

Berkshire Hathaway’s fundamental strategy has been to identify valuable companies and then acquire increasingly large portions of them. These directors are incentivized to stay on the board, which often means choosing not to offend a CEO or fellow directors so that his popularity with management can remain strong and he can continue to collect https://forexarena.net/ directors’ fees. The first, and most common, boardroom situation is one where there is no controlling shareholder. The board of directors is intended to hold the CEO accountable for his actions, but too often CEO’s are never challenged by their boards. In his 1993 letter, Buffett lays out the three “boardroom situations” in great detail.

“In my early days, I, too, rejoiced when the market rose. Then I read chapter eight of Ben Graham’s ‘The Intelligent Investor,’ the chapter dealing with how investors should view fluctuations in stock prices,” he wrote in his 2011 letter. “Immediately, the scales fell from my eyes, and low prices became my friend. Picking up that book was one of the luckiest moments in my life.” The idea of value investing maintains that you should choose your stocks with intention and trust, as a result of research in their business practices, and stay loyal to them for the long term. If you read, for example, that the Apple stock is going up in price, don’t rush to sell―continue to research Apple’s business strategy and future prospects, so that you can have confidence that your investment will pay off in the long term. In this article, published in Columbia Business School magazine Hermes, Buffett vouched for Graham and Dodd’s idea of value investing, arguing against people who thought it obsolete. He thought that thorough research into the business fundamentals of different companies can predict which stocks may be under- or overvalued by the stock market.

Eventually, Buffett says, the market will catch up and reward those companies. In 2013, Buffett reported that GEICO had generated $73B for Berkshire Hathaway in one year — not a bad single-year return for a company that Buffett took over for $2.3B. At the same time, many executives at companies that had failed or suffered huge losses received record levels of compensation. For Buffett, executive bonuses can work to motivate people to go above and beyond, but only when they’re closely tied to personal success in places within an organization where an executive has responsibility.

Berkshire Hathaway Letters to Shareholders

This book tells the story of how MiTek, which started out as a small Midwestern firm in 1955, went from being on the verge of financial collapse to becoming a dominant supplier in its industry. As a result of his successful investment firm and a few other partnerships, Buffett became a millionaire in 1962. He decided to merge his many business partnerships into one and invested heavily in the textile manufacturing firm Berkshire Hathaway. Historically, the value investing strategy has consistently outperformed the market. From Buffett’s idea, we are now more equipped to make mindful, evidence-based decisions about how, when, and why we choose to invest our money. When you have your eggs in too many baskets, however, you may start to lose track of the eggs, or care a little less about each one because there’s enough of them, according to Warren Buffett.

Each holding now accounts for roughly 5% of Berkshire’s net worth, akin to its weighting long ago. Our satisfactory results have been the product of about a dozen truly good decisions – that would be about one every five years – and a sometimes-forgotten advantage that favors long-term investors such as Berkshire. It’s a compilation of every letter Warren Buffett wrote to the shareholders of Berkshire Hathaway. Last year I got Buffett’s endorsement — plus a few non-public letters — to publish the book for the benefit of fans and shareholders of Berkshire. If you are an entrepreneur, investor and generally are interested in business, I highly recommend those letters.

The Future of Investing

Textile business which, over the longer term, is unlikely to produce returns on capital comparable to those available in many other businesses. One thing that stuck out that he is humble yet very proud at the same time. Of his partners in this enterprise, but also very much of America itself and refers to its tailwind that helped american businesses. I view him as an optimist, an attitude that certainly helps if you plan really long term. Oh, and compound interest unfolds before your eyes, year by year, as we are nearing the 60th letter . I feel bad I kept postponing reading Oracle of Omaha’s letters until now.

• Neither Graham nor Buffett place any sort of value on market forecasts, and while past performance is no indication of future success, it is still a far better indicator than any market forecast previously produced.
• Thus, volatility actually works in favor of the intelligent investor because increased volatility creates increased opportunity to take advantage of even lower lows and higher highs.
• Buffett is a bigger advocate of buybacks than many other investors and neutral observers of the stock market.

While Buffett is known for generating incredible returns in the market, he doesn’t keep all of his capital for himself. Many charities have benefited from the returns he has managed in the market over the decades. He got the idea to start the fund in 1956 after his friends and family asked for his insight into investing and the markets. Different sources report different fee structures, with some saying he took 25% to 50% of any gains above 4% or 6%.

Never use borrowed money to buy stocks

Throughout his childhood and teen years, Buffett ventured many of what we might today call “side hustles,” selling things like gum, magazines, and golf balls, door to door. At age 13, he filed his first tax return, deducting $35 for the use of his bike and watch on his paper route. On March 14, 2011, Berkshire Hathaway announced that berkshire hathaway letters to shareholders it would acquire the Lubrizol Corporation for $9 billion in cash, a deal that was described as one of the largest deals ever for Berkshire Hathaway. In September 2008, MidAmerican Energy Holdings, a subsidiary of Warren Buffett’s Berkshire Hathaway Inc., invested about US$230 million for a 10% (or 9.89%) share of BYD @ HK$8/share.

The warrants have been exercised and Berkshire holds 3% of the share capital of Goldman Sachs. Profit on the preferred stock was estimated at $1.8 billion and exercising the warrants has yielded a profit of more than $2 billion, although Berkshire’s continued ownership of shares in Goldman Sachs means the entire profit cannot be quantified. Berkshire’s annual shareholders’ meetings take place at the CHI Health Center in Omaha, Nebraska.

The corporate identity of Berkshire Hathaway will always be inextricably linked to the remarkable career and investment track record of Warren Buffett. Berkshire is not only respected based on its impressive financial results, but also due to the company’s unique business philosophy. With important contributions made by Vice Chairman Charlie Munger, Mr. Buffett has built a legacy that is well worth careful study. Like many business leaders, Buffett feels that investing back into the business provides more long-term value to shareholders than paying them directly because the company’s financial success rewards shareholders with higher stock values. Whether you have any interest in Buffett at all, you would learn a lot about business and life in general from checking out what he has to say. He has written extensively on the stock market, finding a company at an attractive market price, raking in returns, building a portfolio, and finding the best price for any investment.

‘The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success’

All of this led Clayton to being able to increase its market share significantly as others in the industry got washed out as securitization financing dried up in the ’08 crisis. Going to my first shareholder meeting this May, so reading this was a great way to get the most out of the trip. Berkshire Hathaway is a holding company for a multitude of businesses run by chair and CEO Warren Buffett. Berkshire Hathaway’s flagship BRK.A shares have increased by 3,641,613% from 1965 to 2021 compared to the S&P 500 returning 30,209% over the same period. On May 1, 2021, Berkshire Hathaway Vice Chairman Charlie Munger unofficially announced that Warren Buffett would be succeeded as chief executive officer by Greg Abel when Buffett eventually steps down.

Despite the company having a record amount of cash on hand, the prospect of a Berkshire Hathaway dividend is dim as long as Buffett is in charge. The company has paid only one dividend, in 1967, and Buffett later joked that he must have been in the bathroom when the decision was made. Tim Smith has 20+ years of experience in the financial services industry, both as a writer and as a trader.

Berkshire Hathaway Letters to Shareholders: 1965 – 2014 (Hardback or Cased Book)

Charlie and I, along with many Berkshire shareholders, enjoy poring over the many facts and figures laid out in that section. There are many Berkshire centimillionaires and, yes, billionaires who have never studied our financial figures. They simply know that Charlie and I – along with our families and close friends – continue to have very significant investments in Berkshire, and they trust us to treat their money as we do our own. It does not help that many letters are repetitive like detailing the annual meeting or how Berkshire works, over and over again, with only a handful of words and values changed.

For Buffett, investors succeed when they can ignore Mr. Market and his up-and-down emotional states. Instead, they look at whether the companies that they’re invested in are profitable, returning dividends to investors, maintaining high product quality, and so on. Buffett disagrees completely with this approach, and he ranks this maxim as perhaps the “most foolish” of all of Wall Street’s sayings. And with Berkshire’s portfolio, he is adamant that the price of a stock is one of the least important factors to consider when deciding whether to buy or sell shares in a particular company. During inflation, the conventional wisdom has been that businesses with lots of tangible capital resources were the best bets. With their factories and machinery, the thinking went, they could better weather the market impact of widespread lower purchasing power and higher costs.

Buffett also noted buybacks at AmEx and Apple — Berkshire’s largest position at the end of last year — increased the company’s ownership in each firm. Last year, at our first shareholder get-together in three years, we greeted you with our usual commercial hustle. Warren and I hated railroad stocks for decades, but the world changed and finally the country had four huge railroads of vital importance to the American economy.

When Warren Buffett assumed control of Berkshire Hathaway in 1965, it was a small and struggling textile mill with profits of just $125,586 in the year before he took over and a net loss over the preceding ten years. Through Warren Buffett’s annual letters to his shareholders, his readers follow Berkshire’s journey from struggling textile mill to diversified juggernaut with a great amount of detail. It is surreal to look at the astounding amount of change that has taken place during his forty-eight years at the helm. Along the way, Buffett shares with his stockholders great insight into the reasoning behind every acquisition and major investment made and provides a highly detailed historical account of Berkshire Hathaway’s growth.

However, many of the articles published during the early years of the website are less relevant today. Articles that continue to remain relevant today are highlighted on this page. Unfortunately the letters aren’t properly separated by year so the specific year references aren’t included. Anyway, for those looking for one, this is an ok summary at less than 10% of the length of the full letters. It includes a mix of bite-size quotes and most if not all of the longer essays.