On Saturday Warren Buffett released his annual letter on Berkshire Hathaway. If you are an investor it is a must read. Here are the best quotes from the letter.
On Berkshire’s Investments
… stock repurchases at Coca-Cola, American Express and Wells Fargo raised our percentage ownership of each. Our equity in Coca-Cola grew from 9.1% to 9.2%, our interest in American Express increased from 14.2% to 14.8% and our ownership of Wells Fargo grew from 9.2% to 9.4%. And, if you think tenths of a percent aren’t important, ponder this math: For the four companies in aggregate, each increase of one-tenth of a percent in our ownership raises Berkshire’s portion of their annual earnings by $50 million.
On BNSF Railroad
BNSF, like all railroads, also moves its cargo in an extraordinarily fuel-efficient and environmentally friendly way, carrying a ton of freight about 500 miles on a single gallon of diesel fuel. Trucks taking on the same job guzzle about four times as much fuel.
Elephant Hunting or Tuna Fishing?
In past letters Buffett has said he is elephant hunting for new businesses. He is now fishing.
With the acquisition of Van Tuyl, Berkshire now owns 9 1⁄2 companies that would be listed on the Fortune500 were they independent (Heinz is the 1⁄2). That leaves 490 1⁄2 fish in the sea. Our lines are out.
… my experience in business helps me as an investor and that my investment
experience has made me a better businessman. Each pursuit teaches lessons that are applicable to the other. And some truths can only be fully learned through experience. (In Fred Schwed’s wonderful book, Where Are the Customers’ Yachts?, a Peter Arno cartoon depicts a puzzled Adam looking at an eager Eve, while a caption says, “There are certain things that cannot be adequately explained to a virgin either by words or pictures.”
For the great majority of investors, however, who can – and should – invest with a multi-decade horizon, quotational declines are unimportant. Their focus should remain fixed on attaining significant gains in purchasing power over their investing lifetime. For them, a diversified equity portfolio, bought over time, will prove far less risky than dollar-based securities.
The gecko, I should add, has one particularly endearing quality – he works without pay. Unlike a human spokesperson, he never gets a swelled head from his fame nor does he have an agent to constantly remind us how valuable he is. I love the little guy.
When I was a teenager– in my one brief flirtation with honest labor – I tossed about 500,000 papers.
Benjamin Franklin Wisdom
Buffett always has some common sense wisdom in his letters.
It’s better to have a partial interest in the Hope Diamond than to own all of a rhinestone.
In the world of business, bad news often surfaces serially: You see a cockroach in your kitchen; as the days go by, you meet his relatives.
Market forecasters will fill your ear but will never fill your wallet.
We’ve found that if you advertise an interest in buying collies, a lot of people will call hoping to sell you their cocker spaniels.
… never underestimate the man who overestimates himself.
Buffett has always said Berkshire won’t pay a dividend but hints that they might in the future.
Eventually – probably between ten and twenty years from now – Berkshire’s earnings and capital resources will reach a level that will not allow management to intelligently reinvest all of the company’s earnings. At that time our directors will need to determine whether the best method to distribute the excess earnings is through dividends, share repurchases or both.