Warren Buffett’s Shareholder Letters Collection From 1950s To Today

From 1997 to 2016, the average active stock investor only made about 4% returns annually, compared to 10% returns for the S&P 500 index as a whole. In other words, constantly buying and selling stock, and thinking that you can get an advantage from your instincts or analysis, has been proven to lead, in most cases, to smaller gains. Warren Buffett could not be farther from that image of the hustling networker. In fact, he is an advocate of a much more passive, 99% sloth-like approach to investing. For him, it is CEOs and shareholders’ constant action — buying and selling of stocks, hiring and firing of financial advisers — that creates losses.

For Buffett, those intangible things are of the utmost importance for value-driven investors. Too often, for Buffett, executive compensation plans impotently reward managers for nothing more than their firm’s earnings increasing or a stock price rising — outcomes for which the conditions were often created by a previous manager. Our mission is to nurture the love of books and support your book-reading fantasies. Let’s use our love of books to collectively build brilliant, creative futures for ourselves and our world. Buffett states that the best place to find true independence-“the willingness to challenge a forceful CEO when something is wrong or foolish”-is among people whose interests are aligned with shareholders.

About Hooked To Books

Correctly picking the winners requires understanding which companies are building a competitive advantage that will be defensible over the very long term. During the dotcom boom, that meant understanding how the infrastructure of the web would change over the next several decades — an impossible task for any observer at the time. While the technological innovation was even more impressive than the https://forexarena.net/ car, the industry as a whole could be said to have failed most of its investors. By 1992, the collection of all airline companies produced in the US had produced a total of no profits whatsoever. When Buffett invests, he is not looking at the innovative potential of the company or, in a vacuum, its growth potential. The Washington Post’s stock suffered too, even after Buffett’s acquisition.

Additionally, Berkshire owns over fifty non-insurance subsidiaries in a wide variety of industries including furniture, jewelry, bricks, and many more. Berkshire has a policy of acquiring companies and leaving the existing management in place, which allows Berkshire to be the “destination of choice” for owners who do not wish to see their company levered up and sold for a profit. Even the “operating earnings” Buffett prefers to look at, however, fall short of offering investors the kind of clean view of a company’s results investors must make for themselves. Investors have pored over Buffett’s writings for decades looking for ways to imitate his investment process and generate the kinds of returns Berkshire shareholders have enjoyed for three generations. We seek out good long-term investments and stubbornly hold them for a long time. At yearend, our Coke investment was valued at $25 billion while Amex was recorded at $22 billion.

Warren Buffett’s Annual Letter Berkshire Hathaway Shareholders

As of 2012, Berkshire carried investments per share of $113,786 and non-insurance subsidiary earnings per share of $8,085. “These dividend gains, though pleasing, are far from spectacular,” he wrote. I have been investing for 80 years – more than one-third of our country’s lifetime. Despite our citizens’ penchant – almost enthusiasm – for self-criticism and self-doubt, I have yet to see a time berkshire hathaway letters to shareholders when it made sense to make a long-term bet against America. And I doubt very much that any reader of this letter will have a different experience in the future. Though economists, politicians and many of the public have opinions about the consequences of that huge imbalance, Charlie and I plead ignorance and firmly believe that near-term economic and market forecasts are worse than useless.

In May, it announced an additional $100B would be spent buying back Apple stock. Since Apple first began buying back its own stock in 2012, it has become one of most prolific stock repurchasers in history. Buffett goes on to discuss the Berkshire portfolio, which he says features all companies where he and Munger do not expect the underlying industries to change in a major way. Coca-Cola’s product has not changed in any meaningful way in over 100 years — just the way that Buffett, as both an investor and as a consumer, likes it.

Never use your own stock to make acquisitions

The home furnishings businesses are Homemakers Furniture, Nebraska Furniture Mart, Jordan’s Furniture, Inc., RC Willey Home Furnishings, and Star Furniture Company. Clayton, headquartered near Knoxville, Tennessee, is a vertically integrated manufactured housing company. At year-end 2004, Clayton operated 32 manufacturing plants in 12 states. Clayton’s homes are marketed in 48 states through a network of 1,540 retailers, 391 of which are company-owned sales centers. On May 1, 2008, Mitek acquired Hohmann & Barnard, a fabricator of anchors and reinforcement systems for masonry and on October 3 of that year, Mitek acquired Blok-Lok, Ltd. of Toronto, Canada.

In 2008, Berkshire purchased preferred stock in Wrigley, Goldman Sachs, and GE totaling $14.5 billion. Berkshire Hathaway acquired Clayton Homes, a maker of modular homes, storage trailers, chassis, intermodal piggyback trailers and domestic containers. On March 12, 2014, it was announced that Graham Holdings Company would divest its Miami television station, ABC affiliate WPLG to BH Media in a cash and stock deal.

Little Book Of Common Sense Investing

Debt also forces shareholders into a Russian roulette equation, according to Buffett in his2018 letter. And “a Russian roulette equation — usually win, occasionally die — may make financial sense for someone who gets a piece of a company’s upside but does not share in its downside. Buffett’s warning was a prescient one for retail investors who decided to take it.

The answers to these three questions will allow the investor to rank all of his possible investments in different “bushes.” According to Buffett, “Aesop’s investment axiom, thus expanded and converted into dollars, is immutable. It applies to outlays for farms, oil royalties, bonds, stocks, lottery tickets, and manufacturing plants. As a long term investor, the durability of a competitive advantage is a key concern to Buffett. The standard of durability has served Buffett well over the years, keeping him out of the tech bubble in the late 1990s because the standard inherently eliminates companies in industries prone to rapid change. Early on, readers see that Buffett is very candid in his communication with his shareholders and that he does not shy away from discussing both his triumphs and failures. When he presents financial statements on a pro forma basis, he does so to reveal truth to his shareholders, rather than display the statements as if nothing bad had happened to the company.

One advantage of our publicly-traded segment is that – episodically – it becomes easy to buy pieces of wonderful businesses at wonderful prices. It’s crucial to understand that stocks often trade at truly foolish prices, both high and low. In truth, marketable stocks and bonds are baffling, their behavior usually understandable only in retrospect. Underlying the actual industry knowledge share, Buffet takes on something of a mentor role for his shareholders and helps the reader avoid the pitfalls of bad investing, bad reporting and bad business practice. This strategy of train and explain means you will leave this book with a wealth of knowledge you never knew you needed.

When Buffett famously said it was wrong that he pays lower tax rates than his secretary, since income coming from investments was not taxed, Obama’s government passed the Paying A Fair Share Act. This controversial Act requires millionaires to pay at least 30% of their income in taxes. Between September 2019 and August 2020, Berkshire purchased more than 5% of the outstanding stock of each of the five largest Japanese general trading companies through its National Indemnity subsidiary. On November 3, 2009, Berkshire Hathaway announced that using stock and cash totaling $26 billion, it would acquire the remaining 77.4 percent of the Burlington Northern Santa Fe Corporation, parent of BNSF Railway, that it did not already own.

This is because an enlarged capital base from retaining earnings can produce “record” earnings yearly even if management does not employ capital any more effectively than it did in the past. Buffett relates this point nicely in his 1977 letter, when he states that he finds “nothing particularly noteworthy in a management performance combining, say, a 10% increase in equity capital and a 5% increase in earnings per share. This is a two-pronged approach for assessing the underlying economics of a company. Buffett favored return on equity over earnings per share as a yardstick to measure managerial effectiveness. This criterion seems to be another mark of Graham’s influence on Buffett. Graham had his own list of various criteria that had to be met in order to ensure a company’s financial strength, and one of them was consistent strong earning power in the past.

As long as Berkshire’s managers continue to think like owners and manage their companies as if the companies are the only assets that they own, Berkshire shareholders can be confident that these outstanding results are likely to continue. Buffett is a proponent of purchasing extraordinary companies at fair prices, rather than average companies at bargain prices. 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. By viewing market prices as quotes from a manic-depressive business partner, the investor is now put in a position of power over market prices rather than enslaved by them (a far-too-common occurrence). Berkshire’s goal is to keep the companies operating exactly as they were before the purchase. As an aid in calculating its intrinsic value, each year Berkshire reports its investments per share and non-insurance subsidiary earnings per share.

Warren Buffett’s Shareholder Letters: Berkshire Hathaway Inc.

In our second category of ownership, we buy publicly-traded stocks through which we passively own pieces of businesses. Charlie and I allocate your savings at Berkshire between two related forms of ownership. First, we invest in businesses that we control, usually buying 100% of each. Berkshire directs capital allocation at these subsidiaries and selects the CEOs who make day-by-day operating decisions. When large enterprises are being managed, both trust and rules are essential.

He is widely considered the most successful investor of the 20th century. Buffett is the primary shareholder, chairman and CEO of Berkshire Hathaway and consistently ranked among the world’s wealthiest people. He was ranked as the world’s wealthiest person in 2008 and as the third wealthiest person in 2011.

However, both of them reveal quite a bit about Buffett’s insight and way of thinking about investments, stocks, the market, asset management, and investing strategy. Both sets of letters are a real asset for anyone who wants to learn more about Buffett’s investing approach and about building a portfolio in general. So as we wrap up the decade, there’s no better time to get your 2020 reading list in order.

• In 2010, Buffett claimed that purchasing Berkshire Hathaway was the biggest investment mistake he had ever made, and claimed that it had denied him compounded investment returns of about $200 billion over the subsequent 45 years.
• 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.
• There is speculation, of course, that Buffett is preparing for more major acquisitions.
• On March 12, 2014, it was announced that Graham Holdings Company would divest its Miami television station, ABC affiliate WPLG to BH Media in a cash and stock deal.

A portfolio that is bought and held with a long-term investment goal in mind will continue to make money, while a portfolio built with a short-term investment goal in mind is much more likely to lose money, especially during volatile periods. Berkshire previously held a considerable stake in Tesco Plc, the UK grocery retailer. Berkshire made its first investment in Tesco in 2006 and in 2012 raised this stake to over 5% of the company with a cost for the investment of $2.3 billion.

On November 14, 2014, Berkshire Hathaway announced that it would acquire Duracell from Procter & Gamble for $4.7 billion in an all-stock deal. In late June 2017, Berkshire Hathaway indirectly acquired Home Capital Group Inc for $400 million giving lifeline to the Toronto-based embattled mortgage lender. In 2012, Berkshire Hathaway bought Texas dailies The Eagle in Bryan-College Station and the Waco Tribune-Herald. In 2013, the company purchased the Tulsa World, the Greensboro, North Carolina-based News & Record, Virginia’s Roanoke Times, and Press of Atlantic City. The company began its BH Media Group subsidiary with a purchase of the Omaha World-Herald in December 2011, which included six other daily newspapers and several weeklies across Nebraska and southwest Iowa. In June 2012, Berkshire purchased 63 newspapers from Media General, including the Richmond Times-Dispatch and Winston-Salem Journal, for $142 million in cash.