Berkshire Hathaway Stock: Warren Buffett’s 2021 Letter To Shareholders

Buffett’s company, Berkshire Hathaway Inc., bought more than $200 million more Occidental Petroleum stock over the past week to give it control of 23.6% of the oil producer’s stock. Berkshire Hathaway disclosed its latest purchases of 3.67 million shares in a filing with the Securities and Exchange Commission on Monday evening, March 27, 2023. To say we both lived happily ever after is an understatement. When Berkshire purchased TTI, the company employed 2,387.

After the end of 1974, the Post had officially been a loser for Berkshire Hathaway, falling from a value of $10.6M to $8M. But Buffett had a conviction the company’s fortunes would turn, and he knew he had picked up the company at a great price, despite the fact that it had fallen even more. Buffett disagrees completely with this approach, and he ranks this maxim as perhaps the “most foolish” of all of Wall Street’s sayings.

That stake leaves Berkshire financing about 1¤2 of 1% of the publicly-held national debt. Though we have experienced a number of years when insurance losses combined with operating expenses exceeded premiums, overall we have earned a modest 55-year profit from the underwriting activities that generated our float. I’m sure it was a joyous day in both Fall River and New Bedford when the union was consummated. After the bands stopped playing and the bankers went home, however, the shareholders reaped a disaster. Buffett identifies the problem in the comparative data the committees use to determine a CEO’s compensation package. This has led to a rapid inflation in which the offers get bigger and more loaded with perks and payments.

Board directors are regularly paid more than $250,000 a year for the work of attending “six or so” annual meetings. They’re seldom fired, according to Buffett, and can generally serve well into their 70s. All of this adds up to a strong set of incentives to do whatever it takes to stay on the board. Buying Dexter Shoe would have been a mistake either way, but using Berkshire stock to buy the company made the problem even worse.

‘Letters to Shareholders’ is soooo much much more than just a collection of letters. Periodically, as alternative paths become unattractive, repurchases make good sense for Berkshire’s owners. During the past two years, we therefore repurchased 9% of the shares that were outstanding at yearend 2019 for a total cost of $51.7 billion. That expenditure left our continuing shareholders owning about 10% more of all Berkshire businesses, whether these are wholly-owned or partly-owned (such as Coca-Cola and Moody’s). Nevertheless, operations of our “Big Four” companies account for a very large chunk of Berkshire’s value.

Took me like 2 months for the letters and another 2 months for valuation. I would suggest to read both, as the former sets the arena or mental framework required and the latter throws you into the field and make you wear your own damn jersey. I was taking unpaid leaves to finish these and https://forexarena.net/ almost lost my job😂. Later, I reread it couple of times to etch into my brain. Got it for like ~$10 bucks and probably I will carry these on my death bed as well. The letters themselves are fine, but this is routinely recommended as an investing book, and as such, I cannot recommend it.

Berkshire Hathaway’s actions related to sustainability (2021 Annual Report, A-3 and A-

“When you are told that all repurchases are harmful to… Berkshire utilizes debt, but primarily through its railroad and utility subsidiaries. For these extremely asset-laden businesses that have constant equipment and capital needs, debt makes more sense, and they will generate plentiful amounts of cash for Berkshire Hathaway even in an economic downturn. Much of Berkshire’s early success came down to the intelligent use of leverage on relatively cheap stocks, as a 2013 study from AQR Capital Management and Copenhagen Business School showed.

Id say it’s a must read for any long term focused investor or someone planning to enter business, most of the core points made in all std business books are present here, and it overall makes for a solid education. I’ve been investing most of my life and have managed money professionally for 9 years. Buffett’s philosophies have had a huge impact on how I run my businesses and live my life. I put this compilation together as a thanks to his positive influence on myself and many, many others. Occidental shares gained more than 3 percent Tuesday to sell for $61.61 after Berkshire’s latest purchases were revealed.

A large percentage of that growth took place in Fort Worth and environs. Our second choice is to buy non-controlling part-interests in the many good or great businesses that are publicly traded. From time to time, such possibilities are both numerous and blatantly attractive. Charlie and I have endured similar cash-heavy positions from time to time in the past. These periods are never pleasant; they are also never permanent.

Berkshire Hathaway Annual Meeting Report 2008

This fits nicely into Buffett’s general investment worldview that the best time to buy is when everyone is selling. And that investment bankers and others use faulty numbers to push the companies they’re selling. Buffett does not believe that standard GAAP accounting figures always give an accurate idea of what a company is worth, so he walks through a valuation of Scott Fetzer Company to explain why Berkshire purchased the company. Again appear and just as earnestly urge spinning off the earlier acquisition in order to ‘unlock shareholder value,’” he writes. His main problem with investment bankers is that their financial incentive is always to encourage action whether or not doing so is in the interest of the company initiating the action.

That shooting-fish-in-a-barrel experience is very rare in negotiated transactions and never occurs en masse. It is also far easier to exit from a mistake when it has been made in the marketable arena. According to Buffett, if the $114.75 had been invested in a no-fee S&P 500 index fund, and all dividends had been reinvested, Buffett’s stake would have grown to be worth $606,811 pre-tax.

You can find most of the letters for free on Berkshire’s website, but this compiles them into a well-designed, easily readable format. It should be noted that Berkshire’s buyback opportunities are limited because of its high-class investor base. If our shares were heavily held by short-term speculators, both price volatility and transaction volumes would materially increase. That kind of reshaping would offer us far greater opportunities for creating value by making repurchases. Nevertheless, Charlie and I far prefer the owners we have, even though their admirable buy-and-keep attitudes limit the extent to which long-term shareholders can profit from opportunistic repurchases.

He identifies several recent promising changes in the culture around boards of directors, including the profusion of women on boards and the mandating of “CEO-free” sessions where executives can speak frankly. On the other hand, he is deeply suspicious of what he sees as the modern-day trend of corporate boards incentivizing directors to be passive accomplices to whatever a CEO wants to do. But, he adds, one should not take from any calamity the idea that America is in decline or at risk — life in America has improved dramatically just since his own birth, and is improving further everyday. While Buffett believes that other countries, particularly China, have very strong economic growth ahead of them, he is still bullish, above all, for his home turf of the United States.

Nasdaq Futures

The Great Recession was in full force in the third quarter, and BNSF’s earnings reflected that slump. The economic outlook was also bleak, and Wall Street wasn’t feeling friendly to railroads – or much else. Every fall, Berkshire directors gather for a presentation by a few of our executives. We sometimes choose the site based upon the location of a recent acquisition, by that means allowing directors to meet the new subsidiary’s CEO and learn more about the acquiree’s activities. With his first child due soon, Paul decided to bet on himself, using $500 of his savings to found Tex-Tronics .

We want your company to be financially impregnable and never dependent on the kindness of strangers . Both of us like to sleep soundly, and we want our creditors, insurance claimants and you to do so as well. Funds attributable to our insurance operations come and go daily, but their aggregate total is immune from precipitous decline. When it comes to investing float, we can therefore think long-term. In fairness to our governmental partner, our shareholders should acknowledge – indeed trumpet – the fact that Berkshire’s prosperity has been fostered mightily because the company has operated in America.

But despite the appealing nature of the deal, the acquisition still turned out to be a mistake for Berkshire Hathaway. No matter how hard the company worked to turn the struggling business around, it could not get any traction. No surprise, then, that Berkshire, as Buffett revealed in his 2020 letter, owns $154B worth of US-based property, equipment, and plants — more than any other American company. Buffett’s long-standing belief is that companies that run high-margin operations, require minimal assets, and can expand sales volume with little-to-no extra capital yield the best results.

Retained earnings have been a key to Berkshire as they have been to the U.S. In the nation’s accounting, the comparable item is labeled “savings.” Without savings, there would have been no investment, no productivity gains and no leap in living standards. To my Canadian friends and family, I know Buffett includes you, too.

Ignore short-term movements in stock prices

To repeat part of my 2017 article, when comparing against other indexes, it is important to understand before- and after-tax return methodology. In addition, any savvy investor wants to know what returns are net of fees. As a reminder, the S&P 500 numbers are pre-tax , whereas the Berkshire numbers are after-tax . S Berkshire Hathaway annual shareholders meeting, Buffett also told a curious seventh-grader that the key to making friends and getting along with coworkers… Because of the incentive structure involved, the venture capital model where one great success of an investment can cover the losses of a hundred failures is especially prone to recommending the use of debt. When money is expensive, having more of it is a way of setting yourself up to take full advantage of opportunities.

She resigned in 2017 after the company was sold to Verizon. “There are managers to whom I have not talked in the last year, while there is one with whom I talk almost daily,” he adds. For Buffett, there’s no reason for the CEOs of Berkshire’s companies to be careful with money if Charlie, him, and the inhabitants of Berkshire Hathaway’s HQ cannot be equally careful with it — so he insists on setting this culture from the top. By 2017, Berkshire Hathaway had hit about $1M in total annual overhead, according to the Omaha World-Herald — a paltry sum for a company with $223B in annual revenues. Putting derivatives on your balance sheets always puts a volatile, unpredictable element into play.

• Again and again, at companies like Citigroup, Tyco, CMGI and others, CEOs made hundreds of millions while their shareholders faced heavy losses.
• One thing that stuck out that he is humble yet very proud at the same time.
• When money is expensive, having more of it is a way of setting yourself up to take full advantage of opportunities.
• Especially with today’s short attention spans of people, it’s not easy.
• To my Canadian friends and family, I know Buffett includes you, too.
• From Buffett’s perspective, buying a stock should follow the same kind of rigorous analysis as buying a business.

And the result is a set of incentives that isn’t good for companies, Buffett argues. One of Buffett’s self-proclaimed worst mistakes as an investor came with his all-stock acquisition of Dexter Shoe Company in 1993. Value investors, on the other hand, purportedly ignore potential growth as a function in their fundamental analysis. But his embrace of “value investing” does not mean Buffett is skeptical of growth — it just means he avoids investing in companiessolelybecause he thinks they have the potential to grow much larger than they are.

Russell 2000 Futures

The accounting rules have changed, and the new measuring stick will normalize returns per se, but I would have liked to continue the tried-and-true value investing methodology of per-share book value. Buffett explains why investments in BNSF and BHE make sense. From 2010 to 2020, BNSF paid $41.8B in dividends to Berkshire, despite investing $41B in fixed assets. But the railroad company pays only what remains after it covers its needs and maintains a $2B cash balance. “This conservative policy allows BNSF to borrow at low rates, independent of any guarantee of its debt by Berkshire,” says Buffett.

Companies that growth investors like might look expensive today, but are worth it if they are going to grow at or above the expected rate. For a long time, however, Buffett notes in his1992letter, investors interested in “value” and berkshire hathaway letters to shareholders investors interested in “growth” have been considered to be at odds. One might expect a figure like Buffett — simple, no nonsense, and focused on intrinsic value — to balk at the energetic spending of capital on stock repurchases.