Every year, Warren Buffett posts a letter to the shareholders of Berkshire Hathaway.
His company has compounded annual gains of 20% since 1965 (blowing away S&P500 or the "market" at 10%).
Here are some highlights of his letter for the year 2020.
👇👇👇
His company has compounded annual gains of 20% since 1965 (blowing away S&P500 or the "market" at 10%).
Here are some highlights of his letter for the year 2020.
👇👇👇
4 components of earnings:
- $21.9B of operating earnings,
- $4.9B of realized capital gains,
- $26.7B from unrealized gains by current holdings,
- $11B loss from a write-down
Although Berkshire made no big acquisitions & earnings fell 9%, intrinsic value per share went up by 5%
- $21.9B of operating earnings,
- $4.9B of realized capital gains,
- $26.7B from unrealized gains by current holdings,
- $11B loss from a write-down
Although Berkshire made no big acquisitions & earnings fell 9%, intrinsic value per share went up by 5%
".. ugly $11 billion write-down – is almost entirely the
quantification of a mistake I made in 2016. That year, Berkshire purchased Precision Castparts (“PCC”), and I paid too much for the company... PCC is far from my first error of that sort. But it’s a big one."
Buffett says
quantification of a mistake I made in 2016. That year, Berkshire purchased Precision Castparts (“PCC”), and I paid too much for the company... PCC is far from my first error of that sort. But it’s a big one."
Buffett says
Buffett isn't a fan of the word "conglomerate" but adds:
Charlie and I want our conglomerate to own all or part of a diverse group of businesses with good economic
characteristics and good managers.
Whether Berkshire controls these businesses, however, is unimportant to us.
Charlie and I want our conglomerate to own all or part of a diverse group of businesses with good economic
characteristics and good managers.
Whether Berkshire controls these businesses, however, is unimportant to us.
It took me a while to wise up. But Charlie – and also my 20-year struggle with the textile operation I inherited
at Berkshire – finally convinced me that owning a non-controlling portion of a wonderful business is more profitable, more enjoyable and
at Berkshire – finally convinced me that owning a non-controlling portion of a wonderful business is more profitable, more enjoyable and
far less work than struggling with 100% of a marginal enterprise.
For those reasons, our conglomerate will remain a collection of controlled and non-controlled businesses.
Charlie and I will simply deploy your capital into whatever we believe makes the most sense...
For those reasons, our conglomerate will remain a collection of controlled and non-controlled businesses.
Charlie and I will simply deploy your capital into whatever we believe makes the most sense...
...Furthermore, as Ronald Reagan cautioned: “It’s said that hard work never killed anyone, but I say why take the
chance?”
chance?”
Now, Buffett titles the next section: "The Family Jewels and How We Increase Your Share of These Gems"
Most of Berkshire’s value, however, resides in four businesses, three controlled and one in which we have
only a 5.4% interest. All four are jewels.
Most of Berkshire’s value, however, resides in four businesses, three controlled and one in which we have
only a 5.4% interest. All four are jewels.
He adds:
The largest in value is our property/casualty insurance operation, which for 53 years has been the core of Berkshire.
Our family of insurers is unique in the insurance field. So, too, is its manager, Ajit Jain, who joined Berkshire in 1986.
The largest in value is our property/casualty insurance operation, which for 53 years has been the core of Berkshire.
Our family of insurers is unique in the insurance field. So, too, is its manager, Ajit Jain, who joined Berkshire in 1986.
Berkshire now enjoys $138 billion of insurance “float” – funds that do not belong to us, but are nevertheless
ours to deploy, whether in bonds, stocks or cash equivalents such as U.S. Treasury bills.
ours to deploy, whether in bonds, stocks or cash equivalents such as U.S. Treasury bills.
Float has some similarities to bank deposits: cash flows in and out daily to insurers, with the total they hold changing very little.
The massive sum held by Berkshire is likely to remain near its present level for many years and, on a cumulative basis, has been costless to us.
The massive sum held by Berkshire is likely to remain near its present level for many years and, on a cumulative basis, has been costless to us.
That happy result, of course, could change – but, over time, I like our odds.
Our second and third most valuable assets – it’s pretty much a toss-up at this point – are Berkshire’s 100% ownership of BNSF, America’s largest railroad measured by freight volume, and 5.4% of Apple.
Our second and third most valuable assets – it’s pretty much a toss-up at this point – are Berkshire’s 100% ownership of BNSF, America’s largest railroad measured by freight volume, and 5.4% of Apple.
And in the fourth spot is our 91% ownership of Berkshire Hathaway Energy (“BHE”).
What we have here is a very unusual utility business, whose annual earnings have grown from $122 million to $3.4 billion during our 21 years of ownership.
What we have here is a very unusual utility business, whose annual earnings have grown from $122 million to $3.4 billion during our 21 years of ownership.
Last year we demonstrated our enthusiasm for Berkshire’s spread of properties by repurchasing the
equivalent of 80,998 “A” shares, spending $24.7 billion in the process.
equivalent of 80,998 “A” shares, spending $24.7 billion in the process.
That action increased your ownership in all of Berkshire’s businesses by 5.2% without requiring you to so much as touch your wallet.
He then talks about his 15 common stock investments that include: $ABBV $AXP $APPL $BAC $BNY $BYD $CHTR $CVX $KO $GM $MRK $USB $MCO $VZ.
(PRO TIP: I added analysis into every single of of these and more on my platform: vvv.ninja/brk.html.)
(PRO TIP: I added analysis into every single of of these and more on my platform: vvv.ninja/brk.html.)
Buffett then talks a bit about some of the people and their ordinary businesses that yielded extraordinary returns and reminds everyone:
"Our unwavering conclusion: Never bet against America."
"Our unwavering conclusion: Never bet against America."
He adds:
Berkshire is a Delaware corporation, and our directors must follow the state’s laws.
Among them is a requirement that board members must act in the best interest of the corporation and its stockholders.
Our directors embrace that doctrine.
Berkshire is a Delaware corporation, and our directors must follow the state’s laws.
Among them is a requirement that board members must act in the best interest of the corporation and its stockholders.
Our directors embrace that doctrine.
Without outright mentioning any hype stocks like #Tesla $TSLA, #Gamestop $GME etc. Buffett says:
The tens of millions of other investors and speculators in the United States and elsewhere have a wide variety of equity choices to fit their tastes.
The tens of millions of other investors and speculators in the United States and elsewhere have a wide variety of equity choices to fit their tastes.
They will find CEOs and market gurus with enticing ideas.
If they want price targets, managed earnings and “stories,” they will not lack suitors.
“Technicians” will confidently instruct them as to what some wiggles on a chart portend for a stock’s next move.
If they want price targets, managed earnings and “stories,” they will not lack suitors.
“Technicians” will confidently instruct them as to what some wiggles on a chart portend for a stock’s next move.
The calls for action will never stop.
Many of those investors, I should add, will do quite well.
After all, ownership of stocks is very much a “positive-sum” game.
Many of those investors, I should add, will do quite well.
After all, ownership of stocks is very much a “positive-sum” game.
Indeed, a patient and level-headed monkey, who constructs a portfolio by throwing 50 darts at
a board listing all of the S&P 500, will – over time – enjoy dividends and capital gains, just as long as it never gets
tempted to make changes in its original “selections.
a board listing all of the S&P 500, will – over time – enjoy dividends and capital gains, just as long as it never gets
tempted to make changes in its original “selections.
Productive assets such as farms, real estate and, yes, business ownership produce wealth – lots of it.
Most owners of such properties will be rewarded. All that’s required is the passage of time, an inner calm, ample diversification and a minimization of transactions and fees.
Most owners of such properties will be rewarded. All that’s required is the passage of time, an inner calm, ample diversification and a minimization of transactions and fees.
If this resonates with you, please follow me and check my research platform where I look at stock fundamentals and post research every week.
I researched all Berkshire Hathaway's stocks here: vvv.ninja/brk.html.
All the best out there! 🚀🚀🚀
I researched all Berkshire Hathaway's stocks here: vvv.ninja/brk.html.
All the best out there! 🚀🚀🚀
Also, I recommend checking out @SvenCarlin, @IshfaaqPeerally, @EconomicsEx, @LynAldenContact, @RealVision, @ttmygh for the amazing information they provide regarding financial markets!
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