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Warren Buffett just released his annual letter to Berkshire Hathaway shareholders on Saturday and every year investors await what the Oracle of Omaha has to say about the market, economy and Berkshire’s past year’s performance.
Buffett has been writing his annual letters for the last 50 years (since 1965) and you can read many of his past letters here. His annual letters are usually laced with funny anecdotes and one-liners as he imparts his investment wisdom and insight gleaned from decades of being arguably the world’s greatest investor.
So without further ado, here are 10 things I learned from Warren Buffett’s 2015 annual letter to Berkshire shareholders:
“Since 1970, our per-share investments have increased at a rate of 18.9% compounded annually, and our earnings (including the underwriting results in both the initial and terminal year) have grown at a 23.7% clip. It is no coincidence that the price of Berkshire stock over the ensuing 45 years has increased at a rate very similar to that of our two measures of value.”
“…we would be delighted to repurchase our shares should they sell as low as 120% of book value. At that level, purchases would instantly and meaningfully increase per-share intrinsic value for Berkshire’s continuing shareholders.”
As at Feb 29 2016, Berkshire’s price-to-book ratio is 1.33.
“Though neither that gain nor the size of our float is reflected in Berkshire’s earnings, float generates significant investment income because of the assets it allows us to hold… Without a doubt, Berkshire’s largest unrecorded wealth lies in its insurance business. We’ve spent 48 years building this multi-faceted operation, and it can’t be replicated.”
“These four investees possess excellent businesses and are run by managers who are both talented and shareholder-oriented. Their returns on tangible equity range from excellent to staggering. At Berkshire, we much prefer owning a non-controlling but substantial portion of a wonderful company to owning 100% of a so-so business. It’s better to have a partial interest in the Hope Diamond than to own all of a rhinestone.
Buffett further elaborated:
Our flexibility in capital allocation – our willingness to invest large sums passively in non-controlled businesses – gives us a significant edge over companies that limit themselves to acquisitions they will operate. Woody Allen once explained that the advantage of being bi-sexual is that it doubles your chance of finding a date on Saturday night. In like manner – well, not exactly like manner – our appetite for either operating businesses or passive investments doubles our chances of finding sensible uses for Berkshire’s endless gusher of cash.”
“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.”
And one final bonus point: Buffett has decided to webcast Berkshire’s annual meeting worldwide in its entirety for the very first time this year. To view the meeting, simply go to https://finance.yahoo.com/brklivestream at 9 a.m. Central Daylight Time (GMT-6) on Saturday, April 30th.
So whether you’re a Berkshire Hathaway shareholder or someone who simply admires or respects Buffett for what he has achieved as a lifelong investor (and as a human being), we no longer have to travel all the way to Nebraska to pay homage to the Oracle of Omaha.