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Book lovers have their own list but this list can never be definitive since there can be no universal consensus on what should go into “the toughest reads out there! Each person’s list, like the idea of utopia or hell, is personal and unique. Buffett is called the “Oracle of Omaha” or the “Sage of Omaha” and is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth.

Through Berkshire, our shareholders own many dozens of businesses. Some of these, in turn, have a collection of subsidiaries of their own. For example, Marmon has more than 100 individual business operations, ranging from the leasing of railroad cars to the manufacture of medical devices. Berkshire’s owners, it should be noted, were not the only beneficiary of that course correction. Treasury, proceeded to collect many tens of billions of dollars from the company in income tax payments.

Stock buybacks are often the best use of corporate cash

He is widely considered the most successful investor of the 20th century. Buffett is the primary shareholder, chairman and CEO of Berkshire Hathaway and consistently ranked among the world’s wealthiest people. He was ranked as the world’s wealthiest person in 2008 and as the third wealthiest person in 2011.

When a manager with a reputation for brilliance tackles a business with a reputation for bad economics, the reputation of the business remains intact. Thoroughly enjoyed Buffett’s words over the first 47 years of Berkshire after his partnership took over ownership. Look forward to a revised edition with as much Buffett writing as can be organized into it. These books are https://forexarena.net/ reputed to be very tough slogs and there is no definitive guarantee you will turn the last page and feel glad you dived in. In fact, chances are most of these books will be flung across the room well before the last chapter. A lot of them are wilting in bookshelves around the world waiting for a day when the owner inevitably bundles it into the charity box for donation.

America is not in decline — it’s becoming more and more efficient

While Buffett does disagree with executives who buy back their company’s shares simply because they have the cash to do it or to inflate earnings, he also believes in buying stocks when they’re underpriced. The second problem is that gaining a controlling ownership in a company often requires paying an above-the-market share price, known as a control premium. To solve this problem, conglomerates often manufactured the overvaluation of their stocks. I would recommend this book to anyone that is a business student and interested in the business world. Buffett has put together annual letters to the shareholders of Berkshire Hathaway over the last 50 years.

General Re had been operating as a dealer in the swap and derivatives market, making money on futures, options on various foreign currencies and stock exchanges, credit default swaps, and other financial products. No business that is not generating value over the long term is worth holding on to, and holding on to a bad business is never going to be a good investing strategy. This observation is important for Buffett, and for his overall conservative strategy in the market. Berkshire reported an $11B write-down of its investment in the metal fabrication company Precision Castparts , as the pandemic brought aerospace manufacturing to a near halt, hurting some of PCC’s largest customers and pushing its shares down. Growth investors, the thinking goes, primarily look for companies that show they can grow at an above average rate.

• This fits nicely into Buffett’s general investment worldview that the best time to buy is when everyone is selling.
• Today, National Indemnity is the largest P/C company in the world as measured…
• I also find it very reassuring the way that he talks so clearly both about the positive aspects of his company, but also about the negative ones.

A $1 million investment by a tax-free institution of that time (e.g., a pension fund or college endowment), would have grown to a about $5.3 billion. Had one invested in gold for protection the same amount of gold would be worth $4,200, less than 1% of what would have been realized from a simple unmanaged investment in American businesses. The magic of metal was no match for the American mettle, said Buffett. Buffett wrote in the annual letter that it is time to abandon the practice of highlighting per-share book value. For nearly three decades, per-share book value was the measuring stick. His frustration with investment banker math reached its boiling point in his 1986 letter to shareholders, in which he dissected the value of Berkshire’s latest acquisition, the Scott Fetzer Company.

A Wonderful Man and a Wonderful Business

At Berkshire Hathaway’s 2004 meeting, he claimed that “when stock can be bought below a business’s value, it is probably the best use of cash” for a company. There are hundreds of books about Buffett’s life, advice, and methods. These are his actual letters — word for word — a “lesson plan” of his views on business and investing.

I learned over many iterations how and why the corporate culture is better in Berkshire than in most other companies. He leads the viewer from the very beginning to today’s state which is an amazing transformation from a declining textile operation to a huge conglomerate holding. It is also detailed why this structure is adventageous, almost to a point where I’d want to buy a few shares. If I had completed the book earlier I would surely have bought some below 1.2 P/BV during the corona times. If you are going to read this book, I would recommend reading in reverse order.

From an $8.6 million purchase of National Indemnity in 1967, Berkshire has become the world leader in insurance “float” – money we hold and can invest but that does not belong to us. Including a relatively small sum derived from life insurance, Berkshire’s total float has grown from $19 million when we entered the insurance business to $147 billion. Many people perceive Berkshire as a large and somewhat strange collection of financial assets. In truth, Berkshire owns and operates more U.S.-based “infrastructure” assets – classified on our balance sheet as property, plant and equipment – than are owned and operated by any other American corporation. At yearend, those domestic infrastructure assets were carried on Berkshire’s balance sheet at $158 billion. That number increased last year and will continue to increase.

H. Brown had to “stand in the shoes of owners” and truly weigh whether the cost of a project was worth the potential results. A bit repetitive, as you would expect, but it was interesting to see how the different businesses in the Berkshire portfolio changed over time as economic conditions changed. This set of letters should be part of any serious investor’s collection of books. Reading Buffet’s berkshire hathaway letters to shareholders letters is a good starting point that introduces one to this entire field of shareholders letters , which when thoughtfully written can prove to be a rich source of wisdom for their readers. Buffet has also demystified various concepts like Economic earnings vs accounting earnings, his rationale as to when the decisions like stock repurchases make sense, why BH has never distributed dividends.

That action “increased your ownership in all of Berkshire’s businesses by 5.2% without requiring you to so much as touch your wallet,” wrote Buffett to shareholders in his 2020 letter. And as Berkshire keeps repurchasing more of its shares, its shareholders will indirectly increase their ownership in Apple, BNSF, BHE, and other Berkshire-owned businesses. “If Charlie and I think an investee’s stock is underpriced, we rejoice when management employs some of its earnings to increase Berkshire’s ownership percentage,” he wrote in his 2018 letter. If investors can do that, they’ll naturally tend to go in the opposite direction of the herd — to “be fearful when others are greedy and greedy only when others are fearful,” as he wrote in 2004.

Google’s Biggest Acquisitions

Many investors follow Buffett’s actions because he is regarded as one of the greatest investors ever. OMAHA, Neb. — Billionaire Warren Buffett’s company bought more than $200 million worth of Occidental Petroleum’s shares over the past week, giving it control of 23.6 percent of the oil producer’s stock. “Cousin” Jimmy Buffett has designed a pontoon “party” boat that is now being manufactured by Forest River, a Berkshire subsidiary.

The point of this breakdown is not to show off Berkshire’s decentralized structure, which offsets most operational costs to the businesses under the Berkshire umbrella, but to explain Berkshire’s culture of cost-consciousness. Buffett’s problem is less with the financial products themselves and more with the motivations behind using them to make a company’s quarterly numbers look better. Asked to imagine a “successful investor,” many would imagine someone who is hyperactive — constantly on the phone, completing deals, and networking. “Today, I would rather prep for a colonoscopy than issue Berkshire shares,” he later wrote. What made this deal even worse for Buffett was the fact that he had conducted the deal not in cash — as he would virtually every other acquisition made through Berkshire Hathaway — but in Berkshire stock.

Charlie later took up law, and I tried selling securities. Since then, I have enjoyed working almost every year with students of all ages, finally “retiring” from that pursuit in 2018. Deb Bosanek, my assistant, scheduled our board’s opening dinner for October 22. Meanwhile, I arranged to arrive earlier that day to meet with Matt Rose, CEO of BNSF, whose accomplishments I had long admired. When I made the date, I had no idea that our get-together would coincide with BNSF’s third-quarter earnings report, which was released late on the 22nd. In the fall of 2009, we consequently selected Fort Worth so that we could visit TTI.

In spring 2001, Cisco’s shareholders had lost a total of 28.6% on their investment — yet CEO John Chambers took home $157M, mostly on his stock options (about $330,000 of that total consisted of direct, cash compensation). It’s no wonder Buffett publishes an updated table of Berkshire’s per-share performance alongside the stock index at the beginning of each year’s shareholder letter, which has become an annual event in the world of business and finance. Warren Edward Buffett is an American business magnate, investor, and philanthropist.

Market volatility

And this was an advantage that Buffett was beginning to see was inflation-proof. That conviction gives him the ability to buy even bigger portions of the companies in which he invests when the overall market goes into a downturn. With a speculator mentality, Buffett might have offloaded GEICO’s stock in the mid-70s. With a downturn in progress and healthy gains already realized, he would have come out ahead.

If you are not already familiar with the concept of float, I refer you to a long explanation on page A-5. To my surprise, our float increased $9 billion last year, a buildup of value that is important to Berkshire owners though is not reflected in our GAAP (“generally-accepted accounting principles”) presentation of earnings and net worth. Berkshire owns a wide variety of businesses, some in their entirety, some only in part. The second group largely consists of marketable common stocks of major American companies. Equities and participate in several joint ventures or other collaborative activities. In Berkshire Hathaway’s annual letter, pushing back on those railing against the practice he believes beneficial to all shareholders.