Archives of “Berkshire” tag

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“What Buffett wouldn’t do”

  
Analysis, Education
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Warren Buffett (@WarrenBuffett) | TwitterInvesting:

  • Don’t be too fixated on daily moves in the stock market (from Berkshire letter published in 2014)
  • Don’t get excited about your investment gains when the market is climbing (1996)
  • Don’t be distracted by macroeconomic forecasts (2004)
  • Don’t limit yourself to just one industry (2008)
  • Don’t get taken by formulas (2009)
  • Don’t be short on cash when you need it most (2010)
  • Don’t wager against the U.S. and its economic potential (2015)

Management:

  • Don’t beat yourself up over wrong decisions; take responsibility for them (2001)
  • Don’t have mandatory retirement ages (1992)
  • “Don’t ask the barber whether you need a haircut” because the answer will be what’s best for the man with the scissors (1983)
  • Don’t dawdle (2006)
  • Don’t interfere with great managers (1994)
  • Don’t succumb to the attitudes that undermine businesses (2015)
  • Don’t be greedy about compensation, if you’re my successor (2015)

Last, Buffett advises “Don’t worry about my health” — because Berkshire’s future success is is tied to reinsurance lieutenant Ajit Jain. “Worry about his.” (2001)

Warren Buffett's Letter to Shareholders

  
Analysis, Education
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warren_buffett

An excerpt:

Our gain in net worth during 2009 was $21.8 billion, which increased the per-share book value of both our Class A and Class B stock by 19.8%. Over the last 45 years (that is, since present management took over) book value has grown from $19 to $84,487, a rate of 20.3% compounded annually.*

Berkshire’s recent acquisition of Burlington Northern Santa Fe has added at least 65,000 shareholders to the 500,000 or so already on our books. It’s important to Charlie Munger, my long-time partner, and me that all of our owners understand Berkshire’s operations, goals, limitations and culture. In each annual report, consequently, we restate the economic principles that guide us. This year these principles appear on pages 89-94 and I urge all of you – but particularly our new shareholders – to read them. Berkshire has adhered to these principles for decades and will continue to do so long after I’m gone.

In this letter we will also review some of the basics of our business, hoping to provide both a freshman orientation session for our BNSF newcomers and a refresher course for Berkshire veterans.

Read Buffett’s full letter to shareholders here.


Buffett's 2010 Letter To Shareholders

  
Analysis, Education, US Market
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For those who care what the man whose corporate existence is intimately tied to the government’s bailout of the financial system, has to say, below we present Buffett’s 2010 letter to shareholders. 

The only section that is relevant to us, and which continues to demonstrate why Berkshire is a walking moral hazard (contrary to his conedmnation of financial weapons of mass destruction), is the disclosure on derivatives.

 
 

Derivatives

Two years ago, in the 2008 Annual Report, I told you that Berkshire was a party to 251 derivatives contracts (other than those used for operations at our subsidiaries, such as MidAmerican, and the few left over at Gen Re). Today, the comparable number is 203, a figure reflecting both a few additions to our portfolio and the unwinding or expiration of some contracts.

Our continuing positions, all of which I am personally responsible for, fall largely into two categories. We view both categories as engaging us in insurance-like activities in which we receive premiums for assuming risks that others wish to shed. Indeed, the thought processes we employ in these derivatives transactions are identical to those we use in our insurance business. You should also understand that we get paid up-front when we enter into the contracts and therefore run no counterparty risk. That’s important.

Our first category of derivatives consists of a number of contracts, written in 2004-2008, that required payments by us if there were bond defaults by companies included in certain high-yield indices. With minor exceptions, we were exposed to these risks for five years, with each contract covering 100 companies. In aggregate, we received premiums of $3.4 billion for these contracts. When I originally told you in our 2007 Annual Report about them, I said that I expected the contracts would deliver us an “underwriting profit,” meaning that our losses would be less than the premiums we received. In addition, I said we would benefit from the use of float. (more…)

The Split Heard Round the World

  
Analysis, Education, US Market
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lnvestors have been clamoring for years and years for Berkshire to split its shares, whether it be the $100,000 A shares or the $3500 B shares.  After voting confirmed the split today, BRK/B shares will be divided into 50 smaller shares tomorrow.  This 50 for 1 split will convert shares to roughly $70.  Berkshire B shares were up $85 yesterday and are up another $130 today.  The bulls are clearly favoring the split and eagerly awaiting its arrival.

Berkshire

Warren Buffett: How I Choose The Next Person To Run Berkshire Hathaway

  
Analysis, Education
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“Four years ago, I told you that we needed to add one or more younger investment managers to carry on when Charlie, Lou and I weren’t around. At that time we had multiple outstanding candidates immediately available for my CEO job (as we do now), but we did not have backup in the investment area.

It’s easy to identify many investment managers with great recent records. But past results, though important, do not suffice when prospective performance is being judged. How the record has been achieved is crucial, as is the manager’s understanding of – and sensitivity to – risk (which in no way should be measured by beta, the choice of too many academics). In respect to the risk criterion, we were looking for someone with a hard-to-evaluate skill: the ability to anticipate the effects of economic scenarios not previously observed. Finally, we wanted someone who would regard working for Berkshire as far more than a job.

When Charlie and I met Todd Combs, we knew he fit our requirements. Todd, as was the case with Lou, will be paid a salary plus a contingent payment based on his performance relative to the S&P. We have arrangements in place for deferrals and carryforwards that will prevent see-saw performance being met by undeserved payments. The hedge-fund world has witnessed some terrible behavior by general partners who have received huge payouts on the upside and who then, when bad results occurred, have walked away rich, with their limited partners losing back their earlier gains. Sometimes these same general partners thereafter quickly started another fund so that they could immediately participate in future profits without having to overcome their past losses. Investors who put money with such managers should be labeled patsies, not partners. (more…)

What’s Warren Buffett Buying Now?

  
Analysis, Education, US Market
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warrenbuffet-buyingDon’t miss to read……..

As shares of Berhshire Hathaway Inc. (NYSE: BRK.A, BRK.B) plunged over the past year, it became fashionable to ask whether or not Warren Buffett had lost his touch.

(See: ETF Guide: Down $16 Billion – Has Warren Buffett Lost His Touch?; MSN Money: The problem with Warren Buffett; Forbes: Has Buffett Lost His Touch; Reuters: Is Warren Buffett losing his touch?)

In June, financial advisor and CNBC contributor Dennis Gartman even called Buffett “an idiot.”

But now that Berkshire has rallied more than 35% from its March lows, the only idiots to be found are those that ever doubted the world’s second-richest man’s business savvy. Indeed, many of the moves Buffett made during last year’s market melee are paying off in a big way. (more…)

10 quotes from Warren Buffett’s letter to shareholders

  
  Education
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Warren Buffett is hunting for elephants and a bear.

You can look through the whole thing here, including as easily digested discussions of accounting as you’re ever likely to see.

But for those with limited time, here’s a look at 10 of the pithier comments.

1. On the search for new investment opportunities for Berkshire’s huge cash reserves after the acquisition of half of Heinz  HNZ -0.08% last month:

“Charlie and I have again donned our safari outfits and resumed our search for elephants.”

2. On strong performance at the GEICO insurance unit:

“The credit for GEICO’s extraordinary performance goes to Tony Nicely and his 27,000 associates. And to that cast, we should add our Gecko. Neither rain nor storm nor gloom of night can stop him; the little lizard just soldiers on, telling Americans how they can save big money by going to GEICO.com. When I count my blessings, I count GEICO twice.”

3. On company headcount:

“Berkshire’s yearend employment totaled a record 288,462, up 17,604 from last year. Our headquarters crew, however, remained unchanged at 24. No sense going crazy.” (more…)

What Warren Buffett said…

  
  Education
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W.B* For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don’t understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it’s going up.
* Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.
* The important thing is to keep playing, to play against weak opponents and to play for big stakes.
* Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
* There are all kinds of businesses that Charlie and I don’t understand, but that doesn’t cause us to stay up at night. It just means we go on to the next one, and that’s what the individual investor should do. (more…)

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