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BUFFETT'S ANNUAL LETTER IS OUT: Here Are The Key Points!

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…)