Berkshire Hathaway Letters to Shareholders 1965 to 2018 Book

“We believe it is insane to risk what you have and need in order to obtain what you don’t need,” Buffett writes. That’s why Buffett is a fan of some kinds of debt, just not the kind that can leave consumers broke when the market swings down. Buffett identifies the problem in the comparative data the committees use to determine a CEO’s compensation package. This has led to a rapid inflation in which the offers get bigger and more loaded with perks and payments. Prior to World War I, the average annual salary of an executive at a large corporation was $9,958, or $220,000 in today’s dollars. Between 1936 and the mid-1970s the average CEO was paid about $1M a year in today’s money.

• In 1996, Berkshire acquired FlightSafety International Inc. , founded in 1951 by Albert Lee Ueltschi.
• 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.
• 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 that year, ConocoPhillips spun off a subsidiary, Phillips 66, of which Berkshire owned 27 million shares. Berkshire later sold back $1.4 billion worth of shares to Phillips 66 in exchange for Phillips Specialty Products. Buffett frequently referred to Phillips 66 as one of the best businesses Berkshire invested in because of its consistent dividends and share buyback programs.

One learns a lot reading these letter, about Berkshire, business, ethics, many different industries, people of mostly high caliber, and how business and financial minutiae do or don’t make sense. This set of letters should be part of any serious investor’s collection of books. Versus reading the letters online, the appendix area references keywords like inflation, taxes, share buybacks, dividends, etc that he talks about in each letter. It’s a great way to reference if you want to look something up and see how Buffet managed during that particular historical period of time. Reading Buffet’s letters is a good starting point that introduces one to this entire field of shareholders letters , which when thoughtfully written can prove to be a rich source of wisdom for their readers. The letters start fairly small in size but grow bigger each year, following the increase in size and scope of Berkshire Hathaway itself.

The Future of Investing

Buffett later admitted that this lower, undercutting offer made him angry. Instead of selling at the slightly lower price, Buffett decided to buy more of the stock to take control of the company and fire Stanton . However, this made Buffett the majority owner of a failing textile business. The company’s insurance brands include auto insurer GEICO and reinsurance firm General Re. Its non-insurance subsidiaries operate in diverse sectors such as confectionery, retail, railroads, home furnishings, machinery, jewelry, apparel, electrical power and natural gas distribution.

On the other hand, he is deeply suspicious of what he sees as the modern-day trend of corporate boards incentivizing directors to be passive accomplices to whatever a CEO wants to do. While Buffett believes that other countries, particularly China, have very strong economic growth ahead of them, he is still bullish, above all, for his home turf of the United States. Since Apple first began buying back its own stock in 2012, it has become one of most prolific stock repurchasers in history. 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.

Read Warren Buffett’s annual letter to Berkshire Hathaway shareholders

It indicates to the reader how to write at a high level, however, I would only recommend this book to business students. He rarely comments on current world events , and is very good at focusing on just writing about the company’s dealings. I learned that they are not stock pickers, they buy businesses and not tickers. The pros and cons of buying a bit of a publicly-traded company vs. owning some in full became clear. I think the smart ones can be influenced by their very prudent business selection process. There are hundreds of books about Buffett’s life, advice, and methods.

General Re had been operating as a dealer in the swap and derivatives market, making money on futures, options on various foreign currencies and stock exchanges, credit default swaps, and other financial products. 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. It is to only invest in companies that can succeed over an extremely long period of time, like 100 years or more. Within a few years, the relatively high priced Dexter shoes were driven out of the market by a flood of cheap, imported versions.

Warren Buffett with Barack Obama, whose administration pursued action to curb the use of complex financial derivatives in the aftermath of the 2008 financial crisis. “I could have hired 15 of the smartest people, you know, math majors, PhD’s. I could have given them carte blanche to devise any reporting system that would enable me to get my mind around what exposure that I had, and it wouldn’t have worked,” he would later say. In1998, berkshire hathaway letters to shareholders Berkshire Hathaway purchased “General Re,” or the General Reinsurance Corporation. He knew that any temporary “hiccup” in the fortunes of the company would give him a good opportunity to offload the business for a profit. He identifies several recent promising changes in the culture around boards of directors, including the profusion of women on boards and the mandating of “CEO-free” sessions where executives can speak frankly.

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But it gives us full ownership of a growing enterprise whose business remains exceptional for precisely the same reasons that prevailed in 1951,” Buffett wrote in his1995 letter. In 1951, Buffett made the decision to invest more half of his net worth in GEICO. He increased his holdings dramatically during the bear market of the mid-70s when GEICO was struggling. By 1995, he owned half of the company — and later that year, he arranged to buy the rest.

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. In shareholder letter after shareholder letter, Buffett reminds his readers that the true stars of Berkshire Hathaway are not him or Charlie Munger — they are the managers that run the various companies under the Berkshire Hathaway umbrella. No business that is not generating value over the long term is worth holding on to, and holding on to a bad business is never going to be a good investing strategy. This observation is important for Buffett, and for his overall conservative strategy in the market.

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. 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. Our property/casualty (“P/C”) insurance business has been the engine propelling Berkshire’s growth since 1967, the year we acquired National Indemnity and its sister company, National Fire & Marine, for $8.6 million. Today, National Indemnity is the largest P/C company in the world as measured… On March 30, 2007, Berkshire Hathaway announced TTI, Inc., to be part of the Berkshire Hathaway Group.

Id say it’s a must read for any long term focused investor or someone planning to enter business, most of the core points made in all std business books are present here, and it overall makes for a solid education. When I purchased ‘Berkshire Hathaway Letters to Shareholders‘ on 15 November 2013 (for the pricy sum of £2.07) I was not sure what I was in for. All I knew was that I liked Warren’s way of thinking, his approach to business and investing and I wanted to read more from the man directly, not via a biographer or hired hand. I surely would have done a double take if my future self had told me I would take 865 days to finish this thick fat almost 1000 page book. When ordinary people borrow money to buy stocks, they’re putting their livelihoods in the hands of a market whose swings can be random and violent, even when it comes to a reliable stock like Berkshire’s. In doing so, they risk potentially losing much more than their initial investment.

To solve this problem, conglomerates often manufactured the overvaluation of their stocks. Warren Edward Buffett is an American investor, industrialist and philanthropist. He is widely regarded as one of the most successful investors in the world.

Finance and financial services

Download the free report to get insight into Buffett’s views on market volatility, value investing, and more. Across the world, companies shuttered their doors and investors lost thousands or even millions on their holdings. In between accounts of Berkshire’s current holdings, he tells jokes, shares anecdotes, and relates quippy aphorisms to help illuminate his core points. Berkshire Hathaway also owns just under 19% of American Express, 11.9% of Bank of America, and 9.8% of US Bancorp. It has purchased controlling stakes in some 60 companies, including well-known brands like GEICO, Dairy Queen, and Fruit of the Loom.

MiTek by Jim Healey I recommend MiTek, an informative history of one of our most successful companies. You’ll learn how my interest in the company was originally sparked by receiving a piece of ugly metal in the mail whose purpose I couldn’t fathom. Since we bought the MiTek in 2001, it has made 33 “tuck-in” acquisitions, almost all of them successful. This book was first published in 1940 and is now in its 4th edition.

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 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.

Instead, he was delighted, especially by the idea that his 5% stake in the company might be able to grow to 6% or 7% simply because the company chose to buy back some of its stock. 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. When Buffett invests, he is not looking at the innovative potential of the company or, in a vacuum, its growth potential. Over 2019, the value of Berkshire Hathaway’s “share” of earnings from those companies — including Apple, Coca-Cola, and American Express — amounted to more than $8.3B. However, perhaps even more than paying dividends, Buffett values the corporate practice of reinvesting profits into growth.

Often called the “legendary investor, Warren Buffett”, he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He was ranked as the world’s wealthiest person in 2008 and is the third wealthiest person in the world as of 2011. The annual report earlier this week, received plenty of attention, given he…and the economic system.” One of Berkshire’s largest businesses, General Re… In media reports, Buffett says that Apple has developed an ecosystem and level of brand loyalty that provides it with a competitive moat, and that consumers appear to have a degree of price insensitivity when it comes to the iPhone.

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. That action “increased your ownership in all of Berkshire’s businesses by 5.2% without requiring you to so much as touch your wallet,” wrote Buffett to shareholders in his 2020 letter.

In May 2000, Berkshire purchased Ben Bridge Jeweler, a chain of jewelry stores established in 1912 with locations primarily in the western United States. This joined Berkshire’s other jeweler acquisition, Helzberg Diamonds. Helzberg is a chain of jewelry stores based in Kansas City that began in 1915 and became part of Berkshire in 1995. In an essay on the company’s past and future, Berkshire Hathaway Chairman Warren Buffett, 84, said the company is likely to keep growing, but not as rapidly as in the past. Buffett said Berkshire might pay its first dividend sometime in the next 10 or 20 years. I’m a bit sad having concluded it though of course can find more subsequent letters to enjoy and learn more.

By 2017, that average pay had ballooned to $18.9M, according to the Economic Policy Institute. Yahoo wasn’t doing well when she arrived, but many said her management style and decisions made it worse. https://forexarena.net/ “Managers of this stripe cannot be ‘hired’ in the normal sense of the word. What we must do is provide a concert hall in which business artists of this class will wish to perform,” he writes.

Once completed, the modernized infrastructure will enable BHE to increase revenue and even start paying dividends. He argues that asset-heavy companies “can be good investments,” with the Burlington Northern Santa Fe Railway and Berkshire Hathaway Energy as prime examples. These two Berkshire-owned companies had combined earnings of $8.3B in 2020.