In his view, many times the company being purchased will sell for full intrinsic value anyway, so the purchasing company must be sure to pay with an equal amount of intrinsic value on its end. In this event, the key question to Buffett is whether he can receive as much intrinsic business value as he gives. Managers should structure their dividend policy so that they retain only the earnings that can be reinvested at a high enough rate of return to create over $1 of market value and distribute the remaining earnings as dividends. He goes on to state that, as opposed to Adam Smith’s “invisible hand,” hyperactive markets act like an “invisible foot,” tripping up and slowing down a progressing economy. But investors should understand that what is good for the croupier is not good for the customer. Just insert the correct numbers, and you can rank the attractiveness of all possible uses of capital throughout the universe.” Both of these criteria are of vital importance to Buffett’s investment decision-making, but regrettably he does not go into a great deal of detail on either subject.
In 2012, National Indemnity acquired workers’ compensation insurer GUARD for $221 million. In 1963, Franklin Otis Booth Jr. invested $1 million in the company (equivalent to $10,300,000 in 2024), and in 1968 David Gottesman also invested in the company. As of berkshire hathaway letters to shareholders the end of 2024, the company had only 27 employees at that corporate headquarters. However, this left Buffett’s fund with a major interest in a declining textile business.
I’m excited to announce the release of a book I’ve been working on for about 6 months now, and first started in 2010.
On October 2, 2014, Berkshire Hathaway Automotive, an auto dealership subsidiary, was created through the acquisition of Van Tuyl Group, the largest auto dealer in the nation that was still independently owned up to that date. In March 2011, Berkshire Hathaway made its first foray into the Indian insurance sector with its non-direct subsidiary BerkshireInsurance.com. In September 2011, Berkshire Hathaway acquired Lubrizol for $9 billion in cash. In February 2010, the remaining portion that it did not already own was acquired for $26 billion.
In June 2017, Berkshire invested $377 million in Store Capital, a Scottsdale-based real estate investment trust that owned more than 1,750 properties in 48 states; the company was sold to private equity firms in 2022. In April 2020, Berkshire sold all shares in the airlines due to the impact of the COVID-19 pandemic on commercial air transport. While Buffett generally does not invest in tech stocks, he has said that Apple is a consumer products company and that he understands consumer products businesses. Aggressive stock purchases continued and by March 31, 2017, Berkshire had amassed a stake of 129 million shares (2.5% of Apple).
Central to Buffett’s thesis on dividend policy is the concept that not all retained earnings are equal.
In October 1999, Berkshire acquired Jordan’s Furniture for an estimated $200 million to $300 million. In addition to brokerage services, it provides mortgage loan originations, title insurance and closing services, home warranty, property insurance and casualty insurance and other related services. The division owns a residential real estate brokerage business, which, in March 2013, was rebranded as HomeServices of America, a division of Berkshire Hathaway Energy. In December 1998, Berkshire acquired Gen Re, headquartered in Stamford, Connecticut, for $22 billion.
Berkshire Hathaway reduced its Apple stake by nearly 50%, selling $75.5 billion worth of stock in the second quarter of 2024, increasing its cash reserves to a record $276.9 billion. By 2017, this position had yielded a profit of about $12 billion excluding the annual interest earned from the preferred stock. In October 2008, Berkshire invested $6.5 billion in Wrigley Company as part of a financing package to enable Mars Inc. to acquire the company. In September 2008, BHE invested about US$230 million for approximately a 10% share of BYD Auto.
Book Review of Berkshire Hathaway Letters to Shareholders by Warren Buffett
- Under the Local Government Act 1888, Berkshire County Council took over functions of the Berkshire Quarter Sessions, covering the administrative county of Berkshire, which excluded the county borough of Reading.
- Managers should structure their dividend policy so that they retain only the earnings that can be reinvested at a high enough rate of return to create over $1 of market value and distribute the remaining earnings as dividends.
- In 2013, the company bought the Tulsa World, the Greensboro, North Carolina-based News & Record, Virginia’s Roanoke Times, and Press of Atlantic City.
Under the Local Government Act 1888, Berkshire County Council took over functions of the Berkshire Quarter Sessions, covering the administrative county of Berkshire, which excluded the county borough of Reading. Reading became the new county town in 1867, taking over from Abingdon, which remained in the county. Much of the county’s early history is recorded in the Chronicles of the Abingdon Abbey, which at the time of the survey was second only to the crown in the extent and number of its possessions, such as The Abbey, Sutton Courtenay.
He focused on selecting stocks that would be held for the long term. Early in his career, Buffett came across the novel idea of using the float from his insurance subsidiaries to invest elsewhere. As of Dec. 31, 2022, Berkshire’s public market equity portfolio was valued at more than $346 billion. Berkshire Hathaway has a long history of operating success and smart investments.
Unique and Useful Gifts for Book Lovers
In the first quarter of 2016, Berkshire began investing in Apple Inc., with a purchase of 9.8 million shares (0.2% of Apple) worth $1 billion. In 2013, Berkshire owned 1.74 million shares of Gannett; however, it sold its shares in the second quarter of 2013. Some shares were sold in 2023 and 2024, with Buffett motivated by the China–United States trade war.
In Compton, a small village, roughly 10 miles from Newbury, a chemical manufacturing company called Carbosynth was founded, in 2006. Newbury is home to the world headquarters of the mobile network operator Vodafone, which is the town’s largest employer with over 6,000 people. The European head offices of major IT companies BlackBerry, CA Technologies, are in the town. The financial company ING Direct has its headquarters in Reading, as does the directories company Hibu.
Buffett favored return on equity over earnings per share as a yardstick to measure managerial effectiveness. This is a two-pronged approach for assessing the underlying economics of a company. 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. 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. When these attributes exist, and when we can make purchases at sensible prices, it is hard to go wrong.” (1994) “We like a business with enduring competitive advantages that is run by able and owner-oriented people.
Shop for Books on Google Play
- Hooked to Books is your trusted source for book reviews, reading inspiration, and writing tips.
- NetJets is the world’s largest provider of fractional ownership programs for general aviation aircraft.
- Buffett personally owns 38.4% of the Class A voting shares of Berkshire Hathaway, representing a 15.1% overall economic interest in the company.
- Berkshire began investing in Chubb Limited in 2023; by 2024, it owned a 6.4% stake worth $6.7 billion.
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. The investor can always use Mr. Market to his advantage as long as he understands that Mr. Market’s purpose is to serve him rather than to guide him. 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. Each letter typically begins with the change in book value over the course of the year. Berkshire’s goal is to keep the companies operating exactly as they were before the purchase.
Analyzing Berkshire Hathaway’s Investment Approach
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. And while Berkshire Hathaway is now a publicly traded company with a market cap over $330 billion — and Class A shares worth $222,850 per share — 50 years ago, Buffett was worried about getting too big. These are his actual letters — word for word — a “lesson plan” of his views on business and investing. This book compiles the full, un-edited versions of 50 years of Warren Buffett’s letters to the shareholders of Berkshire Hathaway.
In 2012, Berkshire acquired Oriental Trading Company, a direct marketing company for novelty items, small toys, and party items for around $500 million. 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. Instead of selling at the slightly lower price, Buffett bought more of the stock at an even higher price to take control of the company and fire Stanton; Stanton and his son resigned in 1965.
In his 1983 letter, Buffett makes exactly this point, saying, “Were we to split the stock or take other actions focusing on stock price rather than business value, we would attract an entering class of buyers inferior to the exiting class of sellers.” Buffett desires shareholders who intend to hold Berkshire stock for the long term, and lowering the price of Berkshire stock to make it more tradable would inherently bring in a more trigger-happy brand of owner who is more than happy to jump in and out of Berkshire stock as he/she pleases. “We will try to avoid policies that attract buyers with a short-term focus on our stock price and try to follow policies that attract informed long-term investors focusing on business values.” (1983) In his 1983 letter, he states his distaste for highly active investing, saying, “One of the ironies of the stock market is the emphasis on activity. In fact, if their business experience continues to satisfy us, we welcome lower market prices for stocks we own as an opportunity to acquire even more of a good thing at a competitive price.”
In 2017, Berkshire was the largest shareholder in United Airlines and Delta Air Lines and a top 3 shareholder in Southwest Airlines and American Airlines. Buffett had made an investment in US Airways in 1989 which, although he sold for a profit, almost lost Berkshire a substantial sum of money. In the third quarter of 2016, Berkshire surprised investors by making large equity investments in the major US airlines. By December 31, 2017, Berkshire owned 166 million shares (3.3% of Apple). By the end of June 2016, this stake had increased to 15.2 million shares (0.3% of Apple). The shares yielded 6%, earning Berkshire $300 million in annual interest.
It’s a compilation of every letter Warren Buffett wrote to the shareholders of Berkshire Hathaway. Readers gain a framework for how to view risk, markets, and investing, as well as an understanding of how truly great businesses should operate. Indeed, these letters can at times provide a window into the mind of a man who is widely considered to be the greatest investor of all time. Under the right circumstances, there is very little that a manager can do to benefit his/her shareholders more than repurchasing undervalued shares. Buffett only contemplates issuing additional shares of stock as part of an acquisition (and even in this instance, only grudgingly). Conversely, if a manager cannot create over $1 of market value for every $1 retained, he has a duty to his shareholders to distribute his earnings to them so that they may earn a higher rate of return elsewhere.
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). Occasionally, Buffett will choose to include special topics in his letters on whatever topic he feels that his shareholders should be aware. These forty-eight letters do not provide a magic formula for valuing companies or maximizing profit in the market. 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.