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.
Here’s the link to this year’s letter. Feel free to point out anything you might like to discuss or anything you think might be worthy of a post.
Here are the key points:
- For just the 9th time, Berkshire’s book value rose less than the S&P 500. Buffett calls the year subpar.
- Berkshire pursued a couple of “elephants” but mostly came up empty, until the recent big Heinz deal.
- Buffett explains his five guidelines for increasing shareholder value: “In summary, Charlie and I hope to build per-share intrinsic value by (1) improving the earning power of our many subsidiaries; (2) further increasing their earnings through bolt-on acquisitions; (3) participating in the growth of our investees; (4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value; and (5) making an occasional large acquisition. We will also try to maximize results for you by rarely, if ever, issuing Berkshire shares.”
- Berkshire’s five biggest non-insurance companies (BNSF, Iscar, Lubrizol, Marmon Group and MidAmerican Energy) broke the goal of having over $10 billion in income this year.
- Berkshire’s new portfolio managers Todd Combs and Ted Weschler both had portfolios that beat the S&P 500 in 2012.
- Both Combs and Weschler now have portfolios of $5 billion to invest.
- Buffett expects Berkshire to buy more Coca-Cola, American Express, Wells Fargo and IBM in the future.
- CEOs who whine about “uncertainty” are silly (see more here)
- Contrary to Buffett’s expectations, the “float” from Berkshire’s insurance businesses continues to grow. He doesn’t expect it to continue, but it grew another $2.5 billion last year. (more…)