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Saturday, February 27, 2016

Saturday Finances — Berkshire Hathaway's Annual Shareholders' Meeting

"A great strategy is just to buy stocks consistently over a lifetime and not worry too much about whether they go up or down in any given month or year."  --Warren Buffet, CEO Berkshire Hathaway Inc.


Times Square_NYC 2009
Photo by tjn



Last year's Berkshire Hathaway annual shareholders' meeting in Omaha had over 40,000 attendees.  It is a hugely popular gathering known for its lighthearted tone and upbeat, positive vibe.  This is due largely to its 85-year old CEO, Warren Buffet.   


Excerpts from Berkshire Hathaway Inc.'s (BRK.A & BRK.B2016 Annual Shareholders' Letter

27 February 2016

To the shareholders of Berkshire Hathaway Inc.

"Berkshire's gain in net worth during 2015 was $15.5 billion, which increased the per-share book value of both our Class A and Class B stock by 6.4%.  Over the last 51 years (that is, since present management took over), per-share book value has grown from $19 to $155,501, a rate of 19.2% compounded annually."

-- If my dad had purchased 100 shares of BRK 51 years ago at $19 per share, his 100 shares would now be worth over $15.5 million.


The Year at Berkshire

For The Environment

Berkshire Hathaway Energy (BHE)

"That company has invested $16 billion in renewables and now owns 7% of the country's wind generation and 6% of its solar generation.  Indeed, the 4,423 megawatts of wind generation owned and operated by our regulated utilities is six times the generation of the runner-up utility.

We're not done.  Last year, BHE made major commitments to the future development of renewables in support of the Paris Change Conference.  Our fulfilling those promises will make great sense, both for the environment and for Berkshire's economics."



Hands-Off Approach

"At Berkshire, we, too, crave efficiency and detest bureaucracy.  To achieve our goals, however, we follow an approach emphasizing avoidance of bloat, buying businesses such as PCC (Precision Castparts Corp.) that have long been run by cost-conscious and efficient managers.  

After the purchase, our role is simply to create an environment in which these CEOs — and their eventual successors, who typically are like-minded — can maximize both their managerial effectiveness and the pleasure they derive from their jobs.  (With this hands-off style, I am heeding a well-known Mungerism:  'If you want to guarantee yourself a lifetime of misery, be sure to marry someone with the intent of changing their behavior.'"  

-- Charlie Munger is Berkshire's Vice Chairmen & Warren Buffet's business partner. He is 92 years old.


Friendly Acquisitions Only

"Berkshire, however will join only with partners making friendly acquisitions.  To be sure, certain hostile offers are justified: Some CEOs forget that it is shareholders for whom they should be working, while other managers are woefully inept.  

In either case, directors may be blind to the problem or simply reluctant to make the change required.  That's when new faces are needed.  We, though, will leave these 'opportunities' for others.  At Berkshire, we go only where we are welcome."


An Optimistic Future

"It's an election year, and candidates can't stop speaking about our country's problems (which, of course, only they can solve).  As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do.

That view is dead wrong:
The babies being born in America today are the luckiest crop in history.

Though the pie to be shared by the next generation will be far larger than today's, how it will be divided will remain fiercely contentious.  

Just as is now the case, there will be struggles for the increased output of goods and services between those people in their productive years and retirees, between the healthy and the infirm, between the inheritors and the Horatio Algers, between investors and workers and, in particular, between those with talents that are valued highly by the marketplace and the equally decent hard-working Americans who lack the skills the market prizes.

Clashes of that sort have forever been with us — and will forever continue.  Congress will be the battlefield; money and votes will be the weapons.  Lobbying will remain a growth industry.

The good news, however, is that even members of the 'losing' sides will almost certainly enjoy — as they should —  far more goods and services in the future than they have in the past.  

The quality of their increased bounty will also dramatically improve.  Nothing rivals the market system in producing what people want — nor, even more so, in delivering what people don't yet know they want.  

My parents, when young, could not envision a television set, nor did I in my 50s, think I needed a personal computer.  Both products, once people saw what they could do, quickly revolutionized their lives.  I now spend ten hours a week playing bridge online.  And, as I write this letter, 'search' is invaluable to me.  (I'm not ready for Tinder, however.)

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."


Click HERE to read the BRK shareholders' letter in its entirety.


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