In 2018, Berkshire’s profit was 4 billion US dollars (under GAAP). Including $2.48 billion in operating profit, $3 billion in non-cash intangible assets write-down (mainly from Kraft Heinz), $2.8 billion in capital gain (from the sale of investable securities) and $20.6 billion in loss (from unrealized capital loss of portfolio).
The new GAAP rules require unrealized portfolio capital gains and losses to be included in profit statistics. As I emphasized in my 2017 annual report, I and Munger, vice chairman of Berkshire, both expressed opposition. On the contrary, we have always believed that in Berkshire, this change in market price will make Berkshire’s profits fluctuate wildly and capriciously.
The quarterly report of 2018 proves this. In the first and fourth quarters, we recorded losses of $1.1 billion and $25.4 billion respectively (under GAAP). In the second and third quarters, we recorded profits of $12 billion and $18.5 billion. In sharp contrast, Berkshire’s companies had sustained and satisfactory operating profits in all quarters of last year, exceeding the profit peak of $17.6 billion in 2016 by 41%.
The sharp fluctuation of our quarterly GAAP earnings will inevitably continue. That’s because our huge equity portfolio-worth nearly $173 billion at the end of 2018-usually fluctuates by more than $2 billion a day. And these must be included in profits immediately according to the new GAAP rules. Indeed, in the fourth quarter, when the stock price fluctuated at a high level, we experienced a few days of "profit" or "loss" exceeding $4 billion.
Our suggestion? Focus on operating profit, not on gains or losses. But this does not mean that we will weaken the importance of investment in Berkshire. Charlie and I always hope that the investment can bring us considerable benefits, despite its high uncertainty.
Our regular readers will find that this year’s shareholder letter has changed. In the past 30 years, we have always mentioned the change of book value per share of Berkshire at the beginning. It’s time to give up this practice.
In fact, the book value per share has lost its relevance, which is caused by three reasons. First of all, Berkshire has gradually changed from a company whose assets are concentrated in selling stocks to a company whose main value lies in business. Secondly, although the equity we hold is calculated at the market price, accounting rules require us to record the value of our subsidiaries with the book value, which is far lower than the current market price. Third, Berkshire is likely to buy back shares in the future, and the transaction price will be higher than the book value, but lower than our estimated endogenous value. Repurchase will increase the endogenous value per share and decrease the book value per share, which will lead to the book value becoming more and more divorced from the economic reality.
In the future financial performance statement, we expect to pay attention to the market price of Berkshire. Markets can be very volatile: just look at the 54-year history listed on page 2. However, with the passage of time, Berkshire’s share price is the best indicator to reflect our business performance.
Before going on, I want to give you some good news-real good news-which is not reflected in our financial report. At the beginning of 2018, the management changed. Ajit Jain was in charge of insurance business and Greg Abel was in charge of all other businesses. Facts have proved that this change should have been promoted long ago. Berkshire is much better managed now than when I was alone. Ajit and Greg have a rare talent, but also have Berkshire’s genes and values.
Now let’s look at what you have.
Focus on the forest-forget the trees
Investors who evaluate Berkshire sometimes study the details of our many different businesses-our "every tree". Considering that we have a large number of investment targets, just like there are many kinds of tree species in the forest, the result of this analysis may make people numb. Some of our trees will get sick, but the illness period will not exceed ten years. At the same time, a large number of other trees are thriving.
Fortunately, investors don’t need to evaluate each tree individually to estimate the intrinsic business value of Berkshire. That’s because our forest contains five important "small forests", and each small forest can be evaluated with reasonable accuracy. Four of them are easily understood differentiated enterprises and financial asset clusters. The fifth-our huge and diversified insurance business-has provided great value to Berkshire in a less obvious way.
Before we look more closely at the first four groves, let me remind you of our prime goal in the deployment of your capital: to buy ably-managed businesses, in whole or part, that possess favorable and durable economic characteristics. We also need to make these purchases at sensible prices.
Before we study the first four forests more carefully, let me remind you of your primary goal in capital allocation: to buy shares of companies with good and sustainable development characteristics-all positions or scattered purchases. Of course, when we buy these stocks, we have to buy them at a reasonable price.
Sometimes we can buy control of qualified companies, but more commonly, we buy 5% to 10% of the publicly traded shares of the company. Our two-pronged investment strategy is rare in the United States, but it also brings us important advantages.
In recent years, this wise road we have followed has achieved clear benefits: many of the stocks we bought in a scattered way have provided us with much greater benefits than those we gained by buying the whole company. This differentiated trading strategy allowed us to buy about $43 billion in publicly offered shares last year, but we only threw away $19 billion in shares. We believe that the companies we invest in provide us with excellent value, far exceeding the value brought by the acquisition of these companies.
Apart from investing in stocks, the most valuable small forest in the Berkshire forest system is still dozens of non-insurance companies controlled by Berkshire (our shares in these companies are usually 100%, and none is less than 80%). These subsidiaries contributed $16.8 billion in net profit to us last year (after deducting various taxes and fees).
This definition is far from the concept that Wall Street bankers and some CEOs often peddle. They usually use "adjusted EBITDA", which excludes some costs that should be included.
For example, management sometimes asserts that their stock incentives should not be counted as expenses. What else can I do-a gift from shareholders? ) restructuring costs? Maybe last year’s reorganization won’t happen again. However, this kind of restructuring is very common-Berkshire has gone this way dozens of times, and our shareholders have always borne the price of doing so.
Abraham Lincoln once asked such a question: "If you call a dog’s tail a leg, how many legs does it have?" Then he answered his own question: "four, because calling the tail a leg doesn’t really make him a leg."
We believe that Berkshire’s amortization expense of $1.4 billion related to the acquisition is not the real economic cost. When we evaluate private enterprises and public offerings, we add this amortization "cost" back to the income under GAAP.
Berkshire’s depreciation expense of $8.4 billion underestimates our real economic cost. In fact, we need to spend more than this amount every year in order to remain competitive in many of our businesses. In addition to "maintaining" capital expenditure, we spend a lot of money to pursue growth. Overall, Berkshire’s investment in factories, equipment and other fixed assets reached a record $14.5 billion last year, of which 89% was used in the United States.
In terms of value, the second grove is our equity investment, and we usually invest 5% to 10% equity in those big companies. Our equity investment was worth nearly $173 billion at the end of the year, far exceeding its cost. If we sell these investments at the end of the year, we will pay about $14.7 billion in federal income tax. However, we are likely to hold most of these stocks for a long time.
Last year, we also received a dividend of $3.8 billion from these investment targets, which will increase in 2019. We hereby announce the dividends we received from the five companies that hold the most valuable stocks:
(1) According to the current annual rate.
(2) Based on the income in 2018, deduct the paid ordinary and priority dividends.
GAAP-which determines the income we report-does not allow the retained earnings investment objects we include to be in our financial accounts. But these benefits are of great value to us: they have remained the same for many years. Our investors (regarded as a group) eventually provided Berkshire with more than one sum of money. Every dollar that these companies reinvest for us.
The main stocks we invest in have excellent economic returns, and most companies use part of the retained earnings to buy back stocks. We like this very much: if we think that the stock price of the invested company is undervalued, we are happy when the management uses part of its income to increase the ownership ratio of Berkshire.
The above is an example from the above table: Berkshire’s shares in American Express have not changed in the past eight years. At the same time, due to the company repurchase, our ownership increased from 12.6% to 17.9%. Last year, Berkshire earned $1.2 billion from American Express, accounting for about 96% of the $1.3 billion we paid for American Express equity. When profits increase and outstanding shares decrease, this is usually a good thing.
The third category is companies in which Berkshire shares control with other parties. Some of our after-tax profits in these businesses-including 26.7% of Kraft Heinz, 50% of Berkadia and German power transmission, and 38.6% of Pilot Flying J-totaled about $1.3 billion in 2018.
In the fourth part of our forest system, Berkshire held $112 billion in US Treasury bills and other cash equivalents at the end of the year, and another $20 billion in various fixed-income instruments. We believe that this part of the funds will not be easily moved at ordinary times, and we promise to always hold at least $20 billion in cash equivalents to prevent all kinds of accidents.
Sometimes, as investors flee the stock market, our stock will fall. But I will never risk a shortage of cash.
In the next few years, we hope to transfer most of the excess liquidity to the business that Berkshire will permanently own. However, the present may not be a good time: the stock prices of enterprises with good long-term prospects are sky-high now.
This means that in 2019, we will expand the scale of stock investment in the open market, but we will also consider the acquisition of large companies.
My expectation of investing more in stocks is not the market demand. We don’t know how the stock will perform next week or next year. We have never made such a prediction. Instead, our idea is to focus on calculating whether the attractive company’s stock price is higher than the market price.
I believe that the intrinsic value of Berkshire can be obtained by adding up the forests of the above four assets and subtracting taxes and fees.
You may ask, if we have a huge tax expense when selling a wholly-owned subsidiary, should we subsidize it? Forget the idea that it would be foolish for us to sell any great company, even if we don’t have to pay taxes. Really excellent enterprises are very hard to find. There is no point in selling anything you are lucky enough to have.
The interest cost on all of our debt has been deducted as an expense in calculating the earnings at Berkshire’s non-insurance businesses. Beyond that, much of our ownership of the first four groves is financed by funds generated from Berkshire’s fifth grove – a collection of exceptional insurance com panies. We call those funds “float,” a source of financing that we expect to be cost-free – or maybe even better than that – over time. We will explain the
characteristics of float later in this letter.
When calculating the cost of Berkshire’s non-insurance business, we have deducted the interest cost of all debts. In addition, most of our ownership funds for the first four forests come from the fifth grove in Berkshire-a series of excellent insurance companies. We call these funds "floating deposits", which is a source of funds with almost zero cost and even income.
Finally, a point of key and lasting importance: Berkshire’s value is maximized by our having assembled the five groves into a single entity. This arrangement a llows us to seamlessly and objectively allocate major amounts of capital, eliminate enterprise risk, avoid insularity, fund assets at exceptionally low cost, occasionally take advantage of tax efficiencies, and minimize overhead.
Last but not least, the maximization of Berkshire’s value is the combination of these five groves into an organic whole. This arrangement enables us to allocate a large amount of capital seamlessly, eliminate enterprise risks, avoid isolation, and obtain funds to purchase assets at a very low cost.
At Berkshire, the whole is greater – considerably greater – than the sum of the parts.
In Berkshire, the whole is bigger than the sum of its parts-quite big.
Repurchase and reporting
Earlier I mentioned that Berkshire will from time to time be repurchasing its own stock. Assuming that we buy at a discount to Berkshire’s intrinsic va lue – which certainly will be our intention – repurchases will benefit both those shareholders leaving the company and those who stay.
Earlier I mentioned that Berkshire will buy back its own shares from time to time. Assuming that the price we buy back is lower than Berkshire’s intrinsic value-this is of course our intention-the repurchase will benefit both the shareholders who leave the company and the shareholders who stay.
True, the upside from repurchases is very slight for those who are leaving. That’s because careful buying by us will minimize any impact on Berkshire’s stoc k price. Nevertheless, there is some benefit to sellers in having an extra buyer in the market.
Admittedly, the benefits of repurchase are very slight for those shareholders who leave. That’s because we will buy back carefully to minimize the impact on Berkshire’s stock price. However, this will always attract more buyers.
For continuing shareholders, the advantage is obvious: If the market prices a departing partner’s interest at, say, 90￠ on the dollar, continuing shareholders reap an increase in per-share intrinsic value with every repurchase by the company. Obviously, repurchases should be price-sensitive: Blindly buying an overpriced stock is valuedestructive, a fact lost on many promotional or ever-optimistic CEOs.
For shareholders who continue to hold shares, the advantages are obvious: if the market price is distorted, the value of one dollar is only 90 cents. At this time, if the company repurchases, the intrinsic value of each share will increase, and shareholders who continue to hold shares will benefit from it. Obviously, repurchase should be price-sensitive: blindly buying at an excessively high share price is damaging the value of the stock, which is ignored by many optimistic CEOs.
When a company says that it contemplates repurchases, it’s vital that all shareholder-partners be given the information they need to make an intelligent estimate of value. Providing that information is wh at Charlie and I try to do in this report. We do not want a partner to sell shares back to the company because he or she has been misled or inadequately informed.
It is important that when a company expresses its intention to buy back, all shareholders should have the right to know the information they need in order to estimate the value wisely. Providing this information is what Charlie and I tried to do in this report. We don’t want a shareholder to sell shares, just thinking that he is misled or not fully informed.
Some sellers, however, may disagree with our calculation of value and others may have found investments that they consider more attractive than Berkshire shares. Some of tha t second group will be right: There are unquestionably many stocks that will deliver far greater gains than ours.
However, some sellers may disagree with our value calculation, while others may have found investments that they think are more attractive than Berkshire shares. Of course, there are indeed many stocks that will bring greater returns than Berkshire.
In addition, certain shareholders will simply decide it’s time for them or their families to become net consumers rather than continuing to build capital. Charlie and I have no current interest in joining that group. Perhaps we will become big spenders in our old age.
In addition, some shareholders think it is time to stop accumulating capital and become a pure consumer. Charlie and I are not interested in joining this team at present. When we are old, we may need very large expenses.
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For 54 years our managerial decisions at Berkshire have been made from the viewpoint of the shareholders who are staying, not those who are leaving. Consequently, Charlie and I have never focused on current-quarter results.
For 54 years, our management decisions in Berkshire have been made from the perspective of continuing to hold shares, not from the perspective of leaving the company. Therefore, Charlie and I have never focused on the current quarterly earnings report.
Berkshire, in fact, may be the only company in the Fortune 500 that does not prepare monthly earnings reports or balance sheets. I, of course, regularly view the monthly financial reports of most subsidiaries. But Charlie and I learn of Berkshire’s overall earnings and financial position only on a quarterly basis.
In fact, Berkshire may be the only Fortune 500 company that doesn’t prepare a monthly profit report or balance sheet. Of course, I often check the monthly financial reports of most subsidiaries. But Charlie and I only know Berkshire’s overall earnings and financial situation quarterly.
Furthermore, Berkshire has no company-wide budget (though many of our subsidiaries find one useful) . Our lack of such an instrument means that the parent company has never had a quarterly “number” to hit. Shunning the use of this bogey sends an impor tant message to our many managers, reinforcing the culture we prize.
In addition, Berkshire does not have a company-wide budget (although many of our subsidiaries find it useful). This means that the parent company has never had a quarterly "number".
Over the years, Charlie and I have seen all sorts of bad corporate behavior, both accounting and operational, induced by the desire of management to meet Wall Street expectations. What starts as an “innocent” fudge in order to not disappoint “the Street” – say , trade-loading at quarter-end, turning a blind eye to rising insurance losses, or drawing down a “cookie-jar” reserve – can become the first step toward full-fledged fraud. Playing with the numbers “just this once” may well be the CEO’s intent; it’s seldom the end result. And if it’s okay for the boss to cheat a little, it’s easy for subordinates to rationalize similar behavior.
Over the years, Charlie and I have seen all kinds of bad corporate behavior, including accounting and operation, which stems from the management’s desire to cater to Wall Street’s expectations. Many CEOs will initially want to play the numbers game "just this once", but in the end it is not. In addition, if the boss can do some small cheating, it will become natural for employees to follow suit.
At Berkshire, our audience is neither analysts nor commentators: Charlie and I are working for our shareholder-partners. The numbers that flow up to us will be the ones we send on to you.
In Berkshire, our audience is neither an analyst nor a commentator: Charlie and I have been working for our shareholders. The financial figures presented to us will also be presented to you finally.
Non-insurance business-from lollipops to locomotives
Let’s now look further at Berkshire’s most valuable grove – our collection of non-insurance businesses –keeping in mind that we do not wish to unnecess arily hand our competitors information that might be useful to them. Additional details about individual operations can be found on pages K-5 – K-22 and pages K-40 – K-51.
Let’s now learn more about Berkshire’s most valuable grove-our non-insurance business-and remember that we don’t want to unnecessarily provide competitors with information that may be useful to them.
Viewed as a group, these businesses earned pre-tax income in 2018 of $20.8 billion, a 24% increase over 2017. Acquisitions we made in 2018 delivered only a trivial amount of that gain.
As a whole, the pre-tax income of these businesses in 2018 was $20.8 billion, an increase of 24% over the previous year. The acquisitions we made in 2018 only contributed negligible benefits.
I will stick with pre-tax figures in this discussion. But our after-tax gain in 2018 from these businesses was far greater – 47% – thanks in large part to the cut in the corporate tax rate that became effective at the beginning of that year. Let’s look at why the impact was so dramatic.
In this discussion, I will stick to the pre-tax figures. However, the after-tax profits of these businesses increased much more in 2018-47%-largely due to the tax reduction measures that took effect at the beginning of the year. Let’s see why the impact is so dramatic.
Begin with an economic reality: Like it or not, the U.S. Government “owns” an interest in Berkshire’s earnings of a size determined by Congress. In effect, our country’s Treasury Department holds a special class of our stock – call this holding the AA shares – that receives large “dividends” (that is, tax payments) from Berkshire. In 2017, as in many years before, the corporate tax rate was 35%, which meant that the Treasury was doing very well with its AA shares. Indeed, the Treasury’s “stock,” which was paying nothing when we took over in 1965, had evolved into a holding that delivered billions of dollars annually to the federal government.
Let’s start with the economic reality: like it or not, the US government "owns" a part of Berkshire, and the scale is determined by Congress. In fact, the Ministry of Finance of our country holds our special stock "A-shares" and receives a lot of "dividends" (that is, taxes) from Berkshire. In 2017, as many years ago, the corporate tax rate was 35%, which means that the Ministry of Finance has gained a lot from its A shares.
Last year, however, 40% of the government’s “ownership” (14/35ths) was returned to Berkshire – free of charge – when the corporate tax rate was reduced to 21%. Consequently, our “A” and “B” shareholders received a major boost in the earnings attributable to their shares
However, last year, when the corporate income tax was reduced to 21%, 40% of this "equity" owned by the government was returned to Berkshire free of charge. Therefore, our A-share and B-share shareholders have made substantial gains.
This happening materially increased the intrinsic value of the Berkshire shares you and I own. The same dynamic, moreover, enhanced the intrinsic value of almost all of the stocks Berkshire holds.
This essentially increases the intrinsic value of Berkshire’s shares, and at the same time increases the intrinsic value of almost all Berkshire-owned shares.
Those are the headlines. But there are other factors to consider that tempered our gain. For example, the tax benefits garnered by our large utility operation get passed along to its customers. Meanwhile, the tax rate applicable to the substantial dividends we receive from domestic corporations is little changed at about 13%. (This lower rate has long b een logical because our investees have already paid tax on the earnings that they pay to us.) Overall, however, the new law made our businesses and the stocks we own considerably more valuable.
These are the most important things, and there are other factors that can weaken our income. For example, the large public facilities we operate transmit tax incentives to consumers. At the same time, the tax rate of large dividends has hardly changed, about 13%. This lower tax rate has been logical for a long time, because the company we invested in has already paid taxes for the dividends paid to us. But on the whole, the new tax law makes our enterprises and the stocks we own more valuable.
Which suggests that we return to the performance of our non-insurance businesses. Our two towering redwoods in this grove are BNSF and Berkshire Hathaw ay Energy (90.9% owned). Combined, they earned $9.3 billion before tax last year, up 6% from 2017. You can read more about these businesses on pages K-5 – K-10 and pages K-40 – K-45.
The most prominent of our non-insurance businesses are BNSF and Berkshire Hathaway Energy (with 90.9% equity). Their pre-tax income last year was $9.3 billion, an increase of 6% over 2017.
Our next five non-insurance subsidiaries, as ranked by earnings (but presented here alphabetically), Clayton Homes, International Metalworking, Lubrizol, Marmon and Precision Castparts, had aggregate pre-tax income in 2018 of $6.4 billion, up from the $5.5 billion these companies earned in 2017.
Next, the top five non-insurance subsidiaries (in alphabetical order) are Clayton Homes, International Metalworking, Lubrizol, Marmon and Precision Castparts, with a total pre-tax income of 6.4 billion US dollars in 2018 and 5.5 billion US dollars in 2017.
The next five, similarly ranked and listed (Forest River, Johns Manville, MiTek, Shaw and TTI) earned $2.4 billion pre-tax last year, up from $2.1 billion in 2017.
The next five: Forest River, Johns Manville, MiTek, Shaw and TTI earned $2.4 billion before tax last year, up from $2.1 billion in 2017.
The remaining non-insurance businesses that Berkshire owns – and there are many – had pre-tax income of $3.6 billion in 2018 vs. $3.3 billion in 2017.
The pre-tax income of other non-insurance businesses was $3.6 billion in 2018 and $3.3 billion in 2017.
Insurance, "floating funds" and Berkshire’s funds
Our property/casualty (“P/C”) insurance business – our fifth grove – has been the engine propelling Berkshire’s growth since 1967, the year we acquired National Indemnity and its sister company, National Fire & Marine, for $8.6 million. Today, National Indemnity is the largest property/casualty company in the world as measured by net worth.
Our property/life ("P/C") insurance business-our fifth forest-has been the engine of Berkshire’s growth since 1967, when we acquired National Insurance Company and its sister company National Fire＆Marine for $8.6 million. Today, National Insurance is the largest P/C company in the world.
One reason we were attracted to the P/C business was the industry’s business model: P/ C insurers receive premiums upfront and pay claims later. In extreme cases, such as claims arising from exposure to asbestos, or severe workplace accidents, payments can stretch over many decades.
One reason why we are attracted by P/C business is the business model of the industry: P/C insurance companies receive the premium first and then pay compensation. In extreme cases, such as claims caused by asbestos exposure, or serious industrial accidents, payments can last for decades.
This collect-now, pay-later model leaves P/C companies holding large sums – money we call “float” – that will eventually go to others. Meanwhile, insurers get to invest this float for their own benefit. Though individual policies and claims come and go, the amount of float an insurer holds usually remains fairly stable in relation to premium volume. Consequently, as our business grows, so does our float. And how it has grown, as the following table shows:
This "pay first" business model makes insurance companies hold a lot of funds-these funds are called "floating deposits". At the same time, insurance companies can use this money for investment and gain income. Although insurance policies and claims change, the scale of floating funds usually remains stable. Therefore, with the growth of our business, the floating deposit is also growing. The following table shows the growth of our floating fund scale:
Including floating funds arising from life insurance, annuity and health insurance business.
We may in time experience a decline in float. If so, the decline will be very gradual – at the outside no more than 3% in any year. The nature of our insurance contracts is such that we can never be subj ect to immediate or nearterm demands for sums that are of significance to our cash resources. That structure is by design and is a key component in the unequaled financial strength of our insurance companies. That strength will never be compromised.
There may be a short-term decline in our floating deposit. But the decline will be very slow-no more than 3% a year. The essence of an insurance contract is to ensure that we will not pay a huge sum of money in a short period of time, so as to avoid threatening our cash flow. This structure needs to be carefully designed, which is the key for insurance companies to maintain their financial strength.
If our premiums exceed the total of our expenses and eventual losses, our insurance operation registers an underwriting profit that adds to the investment income the float produces. When such a profit is earned, we enjoy the use of free money – and, better yet, get paid for holding it.
If our premium exceeds the expenses and compensation we need to pay, our insurance business will generate an underwriting profit. When we get such a profit, we can enjoy using free funds-and, better yet, we can make a profit by holding it.
Unfortunately, the wish of all insurers to achieve this happy result creates intense competition, so vigorous indeed that it sometimes causes the P/C industry as a whole to operate at a significant underwriting loss. That loss, in effect, is what the industry pays to hold its float. Competitive dynamics almost guarantee that the insurance industry, despite the float income all its companies enjoy, will continue its dismal record of earning subnormal returns on tangible net worth as compared to other American businesses.
Unfortunately, all insurance companies want to get this result, which leads to fierce competition. Sometimes it will cause the entire P/C industry to suffer huge underwriting losses. Insurance companies have to pay the price for keeping floating funds. Although all its companies enjoy the benefits of floating deposits, the fierce competition makes the American insurance industry have a bleak return on net assets compared with other industries.
Nevertheless, I like our own prospects. Berkshire’s unrivaled financial strength allows us far more flexibility in investing our float than that generally available to P/C companies. The many alternatives available to us are always an advantage and occasionally offer major opportunities. When other insurers are constrained, our choices expand.
However, I am full of confidence in our own prospects. Berkshire’s unparalleled financial strength gives us greater flexibility in investing in floating funds than other insurance companies.
Moreover, our P/C companies have an excellent underwriting record. Berkshire has now operated at an underwriting profit for 15 of the past 16 years, the exception being 2017, when our pre-tax loss was $3.2 billion. For the entire 16-year span, our pre-tax gain totaled $27 billion, of which $2 billion was recorded in 2018.
Besides, our P/C company has a good underwriting record. Berkshire’s insurance business has had underwriting profits in 15 of the past 16 years, with the exception of 2017, when our pre-tax loss was $3.2 billion. During the whole 16 years, our pre-tax income totaled $27 billion, of which $2 billion was recorded in 2018.
That record is no accident: Disciplined risk evaluation is the daily focus of our insurance managers, who know that the benefits of float can be drowned by poor underwriting results. All insurers give that message lip service. At Berkshire it is a religion, Old Testament style.
This record is not accidental: risk assessment is the daily concern of our insurance managers, who know that in the event of bad underwriting results, the benefits of floating funds will be lost. All insurance companies will convey this orally. But in Berkshire, it is a religion, just like the Old Testament.
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In most cases, the funding of a business comes from two sources – debt and equity. At Berkshire, we have two additional arrows in the quiver to talk about, but let’s first address the conventional components.
In most cases, the capital of an enterprise comes from two sources-debt and equity. We have two other sources in Berkshire, but let’s talk about these two traditional sources first.
We use debt sparingly. Many managers, it should be noted, will disagree with this policy, arguing that significant debt juices the returns for equity owners. And these more venturesome CEOs will be right most of the time.
We use our debts carefully. It should be pointed out that many managers disagree with this policy and think that borrowing can increase shareholders’ returns. And these more adventurous CEOs are right most of the time.
At rare and unpredictable intervals, however, credit vanishes and debt becomes financially fatal. A Russianroulette equation – usually win, occasionally die – may make financial sense for someone who gets a piece of a company’s upside but does not share in its downside. But that strategy w ould be madness for Berkshire. Rational people don’t risk what they have and need for what they don’t have and don’t need.
However, at rare and unpredictable times, debt will become fatal. The Russian roulette formula-usually winning and occasionally dying-may have some financial value for those who only share the company’s rising period, but this strategy is crazy for Berkshire. A rational person will not take risks on what he already has, nor will he be too greedy on what he doesn’t own or need.
Most of the debt you see on our consolidated balance sheet – see page K-65 – resides at our railroad and energy subsidiaries, both of them asset-heavy companies. During recessions, the cash generation of these businesses remains bountiful. The debt they use is both appropriate for their operations and not guaranteed by Berkshire.
Most of the debts you see on our consolidated balance sheet-see page K-65-come from our railway and energy subsidiaries, all of which are asset-intensive companies. During the recession, these enterprises had abundant cash flow. The scale of their debts matches the actual business, and Berkshire does not need to guarantee these debts.
Our level of equity capital is a different story: Berkshire’s $349 billion is unmatched in corporate America. By retaining all earnings for a very long time, and allowing compound interest to work its magic, we have amassed funds
that have enabled us to purchase and develop the valuable groves earlier described. Had we instead followed a 100% payout policy, we would still be working with the $22 million with which we began fiscal 1965.
Our level of equity capital is another matter: Berkshire’s $349 billion is unparalleled among American companies. By keeping profits for a long time and using compound interest to exert its magic, we have accumulated funds that can support us to develop the above four small forests. If we change the dividend to 100%, our current capital may be similar to that in 1965, about $22 million.
Beyond using debt and equity, Berkshire has benefitted in a major way from two less-common sources of corporate funding. The larger is the float I have described. So far, those funds, though they are recorded as a huge net liability on our balance sheet, have been of more utility to us than an equivalent amount of equity. That’s because they have usually been accompanied by underwriting earnings. In ef fect, we have been paid in most years for holding and
using other people’s money
In addition to using debt and equity, Berkshire has two less common sources of funds. One of the bigger ones is the floating deposit I mentioned above. So far, although these funds are recorded as large net liabilities on the balance sheet, they are more useful to us than equity of the same size. That’s because they usually have underwriting profits. In fact, most of the time we get paid for holding or using this part of the floating fund.
As I have often done before, I will emphasize that this happy outcome is far from a sure thing: Mistakes in assessing insurance risks can be huge and can take many years to surfac e. (Think asbestos.) A major catastrophe that will dwarf hurricanes Katrina and Michael will occur – perhaps tomorrow, perhaps many decades from now. “The Big One” may come from a traditional source, such as a hurricane or earthquake, or it may be a total surprise involving, say, a cyber attack having disastrous consequences beyond anything insurers now contemplate. When such a megacatastrophe strikes, we will get our share of the losses and they will be big – very big. Unlike many other insurers, however, we will be looking to add business the next day.
However, this seemingly perfect result actually has high uncertainty: the consequences of misjudging insurance risks may be huge and it may take years to fill the hole. (Think about the asbestos claims in history) "A huge risk event" may come from traditional scenes, such as hurricanes or earthquakes, or it may be completely unexpected, such as the disastrous consequences brought by cyber attacks, which are beyond the scope of insurance companies’ consideration now. When such a super-huge disaster comes, our investment will suffer losses, and they will be huge-very huge.
The final funding source – which again Berkshire possesses to an unusual degree – is deferred income taxes. These are liabilities that we will eventually pay but that are meanwhile interest-free.
The fourth source of funds is deferred income tax. These are the liabilities that we will eventually pay, but they are also interest-free.
As I indicated earlier, about $14.7 billion of our $50.5 billion of deferred taxes arises from the unrealized gains in our equity holdings. These liabilities are accrued in o ur financial statements at the current 21% corporate tax rate but will be paid at the rates prevailing when our investments are sold. Between now and t hen, we in effect have an interest-free “loan” that allows us to have more money working for us in equities than would otherwise be the case.
As I pointed out earlier, about $14.7 billion of our $50.5 billion deferred tax comes from our unconfirmed equity investment income. These liabilities are currently calculated at the tax rate of 21% in our financial statements, but if we sell the equity, we will pay at the actual tax rate. This means that we actually have an interest-free "loan" before we actually pay the tax.
A further $28.3 billion of deferred tax results from our being able to accelerate the depreciation of assets such as plant and equipment in calculating the tax we must currently pay. The front-ended savings in taxes that we record gradually reverse in future years. We regularly purchase additional ass ets, however. As long as the present tax law prevails, this source of funding should trend upward.
There is also a deferred tax of $28.3 billion, because we have accelerated the depreciation of some existing assets, such as factories and equipment. However, we will still buy other assets regularly. As long as the current tax law is still in force, this source of funds will still show an upward trend.
Over time, Berkshire’s funding base – that’s the right-hand side of our balance sheet – should grow, primarily through the earnings we retain. Our job is to put the money retained to good use on the left-hand side, by adding attractive assets.
As time goes by, Berkshire’s capital base will grow mainly through our retained profits. Our job is to make more efficient use of funds by purchasing more attractive assets.
GEICO and Tony Nicely
That title says it all: The company and the man are inseparable.
The title says it all: the company and this man are inseparable.
Tony joined GEICO in 1961 at the age of 18; I met him in the mid-1970s. At that time, GEICO, after a fourdecade record of both rapid growth and outstanding underwriting results, suddenly found itself near bankruptcy. A recently-installed management had grossly underestimated GEICO’s loss costs and consequently underpriced its p roduct. It would take many months until those loss-generating policies on GEICO’s books – there were no less than 2.3 million of them – would expire an d could then be repriced. The company’s net worth in the meantime was rapidly approaching zero.
Tony joined GEICO in 1961 at the age of 18. I met him in the mid-1970s. At that time, GEICO suddenly came close to bankruptcy after 40 years of rapid growth and excellent underwriting performance. The new management seriously underestimated the price that GEICO had to pay, so it underestimated the product price. The amount of policies that generated compensation reached $2.3 million, but it was not until several months later that these policies expired and could be re-priced. At that time, the company’s net assets soon approached zero.
In 1976, Jack Byrne was brought in as CEO to rescue GEICO. Soon after his arrival, I met him, concluded that he was the perfect man for the job, and began to aggressively buy GEICO shares. Within a few months, Berkshire bought about 1?3 of the company, a portion that later grew to roughly 1?2 without our spending a dime. That stunning accretion occurred because GEICO, after recovering its health, consistently repurchased its shares. All told, this halfinterest in GEICO cost Berkshire $47 million, about what you might pay today for a trophy apartment in New York.
In 1976, Jack Byrne was appointed as CEO of GEICO. Shortly after he took office, I met him and thought he was the best candidate for the job, and began to actively buy GEICO shares. Within a few months, Berkshire bought about one-third of the company’s shares. Later, although it didn’t cost a dime, the proportion of this part of the shares increased to about one-half. Because GEICO kept buying back its shares after recovering. All in all, this share cost Berkshire $47 million, which is equivalent to the price of buying a luxury apartment in new york today.
Let’s now fast-forward 17 years to 1993, when Tony Nicely was promoted to CEO. At that point, GEICO’s reputation and profitability had been restored – but not its growth. Indeed, at yearend 1992 the company had only 1.9 million auto policies on its books, far less than its pre-crisis high. In sales volume among U.S. auto insurers, GEICO then ranked an undistinguished seventh.
Now let’s fast forward 17 years. In 1993, Tony Nicely was promoted to CEO. By then, GEICO’s reputation and profitability had been restored-but its growth was still not. In fact, at the end of 1992, the company had only 1.9 million car insurance policies on its books, far below the pre-crisis high. Among American auto insurance companies, GEICO ranks seventh in terms of sales volume.
Late in 1995, after Tony had re-energized GEICO, Berkshire made an offer to buy the remaining 50% of the company for $2.3 billion, about 50 times what we had paid for the first half (and people say I never pay up! ). Our offer was successful and brought Berkshire a wonderful, but underdeveloped, company and an equally wonderful CEO, who would move GEICO forward beyond my dreams.
In late 1995, after Tony revived GEICO, Berkshire offered to buy the remaining shares for $2.3 billion, which was about 50 times the price of our last acquisition of GEICO. Our acquisition was successful, which made Berkshire gain a great company, but it didn’t develop well at that time, and also gained an excellent CEO. Under his leadership, GEICO is exceeding my expectations.
GEICO is now America’s Number Two auto insurer, with sales 1, 200% greater than it recorded in 1995. Underwriting profits have totaled $15.5 billion (pre-tax) since our purchase, and float available for investment has grown from $2.5 billion to $22.1 billion.
GEICO is now the second largest auto insurance company in the United States, with sales increasing 12 times compared with 1995. Since our purchase, the total underwriting profit is $15.5 billion (before tax), and the floating fund available for investment has increased from $2.5 billion to $22.1 billion.
By my estimate, Tony’s management of GEICO has increased Berkshire’s intrinsic value by more than $50 billion. On top of that, he is a model for everything a manager should be, helping his 40,000 associates to identify and polish abilities they didn’t realize they possessed.
According to my estimation, Tony’s management of GEICO has increased Berkshire’s intrinsic value by more than 50 billion dollars. Most importantly, he is a benchmark for all managers, helping his 40,000 employees to realize their potential.
Last year, Tony decided to retire as CEO, and on June 30th he turned that position over to Bill Roberts, his long-time partner. I’ve known and watched Bill operate for several decades, and once again Tony made the right move. Tony remains Chairman and will be helpful to GEICO for the rest of his life. He’s incapable of doing less.
Last year, Tony decided to retire and handed over the position to Bill Roberts, his long-term partner, on June 30th. Tony made the right decision again. Tony is still the chairman and will help GEICO for the rest of his life.
All Berkshire shareholders owe Tony their thanks. I head the list.
All Berkshire shareholders owe Tony a thank you. I bear the brunt.
investment
Below we list our fifteen common stock investments that at yearend had the largest market value. We exclude our Kraft Heinz holding – 325,442, 152 shares – because Berkshire is part of a control group and therefore must account for this investment on the “equity” method. On its balance sheet, Berkshire carries its Kraft Heinz holding at a GAAP figure of $13.8 billion, an amount reduced by our share of the large write-off of intangible assets taken by Kraft Heinz in 2018. At yearend, our Kraft Heinz holding had a market value of $14 billion and a cost basis of $9.8 billion.
The top 15 positions calculated at market prices by the end of 2018 are listed below. Although Kraft Heinz is theoretically Berkshire’s sixth largest heavyweight stock, holding 325 million shares, Berkshire, as a member of the control layer, needs to include this investment in the "equity" project. In the balance sheet, Berkshire’s interest in Kraft Heinz is $13.8 billion (under GAAP), after deducting the intangible assets write-down in 2018. By the end of the year, the market value of Kraft Heinz held by us was $14 billion, and the cost method estimated (actual purchase price+tax base) was $9.8 billion.
*
Excluding shares held by Berkshire’s subsidiary pension fund.
**
This is our actual purchase price and our tax base.
Charlie and I do not view the $172.8 billion detailed above as a collection of ticker symbols – a financial dalliance to be terminated because of downg rades by “the Street,” expected Federal Reserve actions, possible political developments, forecasts by economists or whatever else might be the subject du jour.
Charlie and I don’t think that the $172.8 billion detailed above is just a collection of stock codes. These codes usually fluctuate due to the downgrade of Wall Street rating, expected Fed actions, possible political trends, economists’ predictions, etc.
What we see in our holdings, rather, is an assembly of companies that we partly own and that, on a weighted basis, are earning about 20% on the net tangible equity capital required to run their businesses. These companies, also, earn their profits without employing excessive levels of debt.
On the contrary, in our eyes, this is a collection of companies-these companies, in which we hold some shares, have a return on equity of about 20%, and are operating steadily without excessive debt to make profits.
Returns of that order by large, established and understandable businesses are remarkable under any circumstances. They are truly mind-blowing when compared against the return that ma ny investors have accepted on bonds over the last decade – 3% or less on 30-year U.S. Treasury bonds, for example.
In any case, the returns provided by these large, mature and understandable companies are very considerable. In the past decade, compared with those bond yields-3%, if you invest in 30-year US Treasury bonds, the returns provided by these companies are exciting enough.
On occasion, a ridiculously-high purchase price for a given stock will cause a splendid business to become a poor investment – if not permanently, at least for a painfully long period. Over time, however, investment performance converges with business performance. And, as I will next spell out, the record of American business has been extraordinary.
Sometimes, buying stocks too much will turn a good business into a bad business, even if it is not permanent, it will be very painful for at least a long time. But in the longer term, investment performance is usually synchronized with business performance. Moreover, as I will explain next, the record of American enterprises has been so extraordinary.
"Bon voyage to America"
On March 11th, it will be 77 years since I first invested in an American business. The year was 1942, I was 11, and I went all in, investing $114.75 I had begun accumulating at age six. What I bought was three shares of Cities Service preferred stock. I had become a capitalist, and it felt good.
On March 11th, 77 years ago, I made my first investment in American enterprises. The year was 1942, and I was 11 years old. I put all the money $114.75 accumulated since I was 6 years old into it. I bought three preferred shares of Cities Service. I became a capitalist, which made me feel good.
Let’s now travel back through the two 77-year periods that preceded my purchase. That leaves us starting in 1788, a year prior to George Washington’s installation as our first president. Could anyone then have imagined what their new country would accomplish in only three 77-year lifetimes?
Now let’s look back at the previous 154 years (two 77 years). It was in 1788, the year before George Washington became our first president. Can you imagine what this new country will achieve in the next 231 years (three 77 years)?
During the two 77-year periods prior to 1942, the United States had grown from four million people – about 1?2 of 1% of the world’s population – into the most powerful country on earth. In that sp ring of 1942, though, it faced a crisis: The U.S. and its allies were suffering heavy losses in a war that we had entered only three months earlier. Bad news arrived daily
In the 154 years before 1942, the United States developed from 4 million people (about 0.5% of the world population) to the most powerful country in the world. However, in the spring of 1942, it faced a crisis: the United States and its allies suffered heavy losses in the war we just entered three months ago. Bad news comes every day.
Despite the alarming headlines, almost all Americans believed on that March 11th that the war would be won. Nor was their optimism limited to that victory. Leaving aside congenital p essimists, Americans believed that their children and generations beyond would live far better lives than they themselves had led.
Despite the shocking headlines, on March 11th of that year, almost all Americans believed that they would win the war. Americans believe that their children and future generations will have a better life.
The nation’s citizens understood, of course, that the road ahead would not be a smooth ride. It never had been. Early in its history our country was tested by a Civil War that killed 4% of all Am erican males and led President Lincoln to openly ponder whether “a nation so conceived and so dedicated could long endure.” In the 1930s, America suffered through the Great Depression, a punishing period of massive unemployment.
Of course, the American people also know that the road ahead will never be smooth. Earlier, our country was tested by the civil war, which killed 4% of the American male population. So that President Lincoln openly asked whether this country could exist for a long time. In 1930s, America experienced the Great Depression again.
Nevertheless, in 1942, when I made my purchase, the nation expected post-war growth, a belief that proved to be well-founded. In fact, the nation’s achievements can best be described as breathtaking.
However, when I bought stocks in 1942, this country was already expecting postwar growth, which was later verified.
Let’s put numbers to that claim: If my $114.75 had been invested in a no-fee S&P 500 index fund, and all dividends had been reinvested, my stake would have grown to be worth (pre-taxes) $606,811 on January 31, 2019 (the latest data available before the printing of this letter). That is a gain of 5,288 for 1. Meanwhile, a $1 million investment by a tax-free institution of that time – say, a pension fund or college endowment – would have grown to about $5.3 billion.
Let’s provide figures for this statement: If my $114.75 is invested in the S&P 500 index fund and all dividends are reinvested, this part of my position will reach the pre-tax value of $606,811 on January 31, 2019, which is an increase of 5,288 times. If tax-exempt institutions at that time-such as pension funds or university donations-invested $1 million, it would be worth $5.3 billion now.
Let me add one additional calculation that I believe will shock you: If that hypothetical institution had paid only 1% of assets annually to various “h elpers,” such as investment managers and consultants, its gain would have been cut in half, to $2.65 billion. That’s what happens over 77 years when the 11.8% annual return actually achieved by the S&P 500 is recalculated at a 10.8% rate.
There is also a shocking calculation: if the above-mentioned institutions pay 1% of their assets to investment managers or consultants every year, their income will be halved to $2.65 billion.
Those who regularly preach doom because of government budget deficits (as I regularly did myself for many years) might note that our country’s national debt has increased roughly 400-fold during the last of my 77-year periods. That’s 40,000%! Suppose you had foreseen this increase and panicked at the prospect of runaway deficits and a worthless currency. To “protect” yourself, you might have eschewed stocks and opted instead to buy 31?4 ounces of gold with your $114.75.
There are some people who usually claim that the United States is about to suffer bad luck because the government has a high fiscal deficit. In the past few years, the national debt of the United States has increased by about 400 times. Suppose you have foreseen this growth and panicked about runaway deficits and devalued currencies. In order to "protect" yourself, you may avoid stocks and buy 3 1/4 ounces of gold for $114.75 instead.
And what would that supposed protection have delivered? You would now have an asset worth about $4,200, less than 1% of what would have been realized from a simple unmanaged investment in American business. The magical metal was no match for the American mettle.
What will this "protection" bring? Your current assets are worth $4,200, which is less than 1% of the assets earned by holding the S&P 500 index.
Our country’s almost unbelievable prosperity has been gained in a bipartisan manner. Since 1942, we have had seven Republican presidents and seven Democrats. In the years they served, the country contended at various times with a long period of viral inflation, a 21% prime rate, several controversial and costly wars, the resignation of a president, a pervasive collapse in home values, a paralyzing financial panic and a host of other problems. All engendered scary headlines; all are now history
The United States has achieved almost incredible prosperity in a bipartisan way. Since 1942, we have had seven Republican presidents and seven Democratic presidents. During their years as president, the United States experienced a long period of serious inflation, several controversial and costly wars, the collapse of housing prices, financial panic and a series of other problems. And these have become history.
Christopher Wren, architect of St. Paul’s Cathedral, lies buried within that London church. Near his tomb are posted these words of deion (translated from Latin): “If you would seek my monument, look round you.” Those skeptical of America’s economic playbook should heed his message.
Christopher Wren, the architect of St Paul’s Cathedral, was buried in London Abbey. His epitaph (translated from Latin): "If you want to find my monument, look around."
In 1788 – to go back to our starting point – there really wasn’t much here except for a small band of ambitious people and an embryonic governing frame work aimed at turning their dreams into reality. Today, the Federal Reserve estimates our household wealth at $108 trillion, an amount almost impossible to comprehend.
In 1788-back to our starting point-at that time, except for a small group of ambitious people, planning to realize their dreams with the embryonic government governance framework, the United States had almost nothing. Today, the Federal Reserve estimates that American household wealth has reached $108 trillion.
Remember, earlier in this letter, how I described retained earnings as having been the key to Berkshire’s prosperity? So it has been with America. In the nation’s accounting, the comparable item is labeled “savings.” And save we have. If our forefathers had instead consumed all they produced, there would have been no investment, no productivity gains and no leap in living standards.
Please remember, in the front of this letter, how did I mention that the key to Berkshire’s prosperity lies in maintaining profitability and enjoying compound interest? For the country, the same is true. The key lies in "saving". If our predecessors only consume and do not invest, we will not be able to improve our productivity and living standards.
**********
Charlie and I happily acknowledge that much of Berkshire’s success has simply been a product of what I think should be called The American Tailwind. It is beyond arrogance for American businesses or individuals to boast that they have “done it alone.” The tidy rows of simple white crosses at Normandy should shame those who make such claims.
Charlie and I are happy to admit that most of Berkshire’s success must be attributed to what we call the "American tailwind".
There are also many other countries around the world that have bright futures. About that, we should rejoice: Americans will be both more prosperous and safer if all nations thrive. At Berkshire, we hope to invest significant sums across borders.
There are still many countries in the world that have a bright future. In this regard, we should be happy: if all countries are peaceful and prosperous, the American people will be safer and more prosperous. Berkshire hopes to invest heavily in overseas enterprises.
Over the next 77 years, however, the major source of our gains will almost certainly be provided by The American Tailwind. We are lucky – gloriously lucky – to have that force at our back.
Of course, in the next 77 years, the main source of our harvest will almost certainly come from "the United States has a good wind." We are lucky to have this power behind us.
year-end party
Berkshire’s 2019 annual meeting will take place on Saturday, May 4th. If you are thinking about attending – and Charlie and I hope you come – check out the details on pages A-2 – A-3. They describe the same schedule we’ve followed for some years.
Berkshire’s 2019 Annual Meeting will be held on Saturday, May 4th. The schedule is similar to that of previous years, and we welcome you.
If you can’t join us in Omaha, attend via Yahoo’s webcast. Andy Serwer and his Yahoo associates do an outstanding job, both in covering the entire meeting and interviewing many Berkshire managers, celebrities, financial experts and shareholders from the U.S. and abroad. The world’s knowledge of what goes on in Omaha the first Saturday of every May has grown dramatically since Yahoo came on board. Its coverage begins at 8:45 a.m. CDT and provides Mandarin translation.
If you can’t come to the scene, you can attend it through Yahoo’s webcast. Andy Serwer and his Yahoo employees did an excellent job, covering the whole annual meeting and interviewing many Berkshire managers, celebrities, financial experts and shareholders from the United States and overseas. Since Yahoo reported online, the influence of Berkshire’s annual meeting has increased dramatically. This year’s report will start at 8: 45 am CDT, and Mandarin translation will be provided.
**********
For 54 years, Charlie and I have loved our jobs. Daily, we do what we find interesting, working with people we like and trust. And now our new management structure has made our lives even more enjoyable.
For 54 years, Charlie and I have loved our work. Every day, we do what we think is interesting and cooperate with people we like and trust. Now, the new company management structure makes our life more enjoyable.
With the whole ensemble – that is, with Ajit and Greg running operations, a great collection of businesses, a Niagara of cash-generation, a cadre of talented managers and a rock-solid culture – your company is in good shape for whatever the future brings.
The whole team, led by Ajit and Greg, has run a lot of companies, generated huge cash flow, and has extremely talented managers and an indestructible culture. No matter what the future holds, the companies you own have a good outlook at present.
February 23, 2019
Warren Buffett
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Reader’s Welfare: The Complete Works of Buffett’s Shareholders’ Letters from 1957 to 2019
Buffett’s letter to shareholders in 1957: investors are too optimistic about blue chips.
https://xuangubao.cn/article/426430
Buffett’s letter to shareholders in 1958: Our performance is better in the bear market.
https://xuangubao.cn/article/426434
Buffett’s letter to shareholders in 1959: I would rather accept the punishment caused by excessive conservatism.
https://xuangubao.cn/article/426435
Buffett’s letter to shareholders in 1960: Why did I vote for Sanborn Map Company?
https://xuangubao.cn/article/426439
Buffett’s letter to shareholders in 1961: We made an annual income of 45.9%.
https://xuangubao.cn/article/426443
Buffett’s letter to shareholders in 1962: the promise of a certain rate of return is bullshit.
https://xuangubao.cn/article/426447
Buffett’s letter to shareholders in 1963: It takes time to buy properly.
https://xuangubao.cn/article/426454
Buffett’s letter to shareholders in 1964: the joy of compound interest
https://xuangubao.cn/article/426456
Buffett’s Letter to Shareholders in 1965: Centralized Investment or Diversified Investment?
https://xuangubao.cn/article/426462
Buffett’s letter to shareholders in 1966: We have ushered in the first decade.
https://xuangubao.cn/article/426474
Buffett’s letter to shareholders in 1967: both qualitative and quantitative analysis should be taken into account to make big money.
https://xuangubao.cn/article/426475
Buffett’s letter to shareholders in 1968: 58.8% yield! This result is completely abnormal.
https://xuangubao.cn/article/426477
Buffett’s letter to shareholders in 1969: I hope everyone knows my desire to retire.
https://xuangubao.cn/article/426481
Buffett’s Letter to Shareholders in 1970: Why and What Bonds to Buy?
https://xuangubao.cn/article/426482
Buffett’s Letter to Shareholders in 1971: The insurance business performed exceptionally well.
https://xuangubao.cn/article/426485
Buffett’s Letter to Shareholders in 1972: Diversified investment establishes a high profit base.
https://xuangubao.cn/article/426493
Buffett’s Letter to Shareholders in 1973
https://xuangubao.cn/article/426503
Buffett’s Letter to Shareholders in 1974
https://xuangubao.cn/article/426508
Buffett’s Letter to Shareholders in 1975
https://xuangubao.cn/article/426510
Buffett’s Letter to Shareholders in 1976
https://xuangubao.cn/article/426513
Buffett’s letter to shareholders in 1977: the way to invest in stocks = the way to buy companies.
https://xuangubao.cn/article/426518
Buffett’s letter to shareholders in 1978: We merged diversified retail companies.
https://xuangubao.cn/article/426526
Buffett’s letter to shareholders in 1979: the basis for judging the quality of operation is the rate of return on shareholders’ equity.
https://xuangubao.cn/article/426529
Buffett’s Letter to Shareholders in 1980: Where are the moats and risks of the insurance industry?
https://xuangubao.cn/article/426530
Buffett’s letter to shareholders in 1981: M&A can succeed in two situations.
https://xuangubao.cn/article/426536
Buffett’s letter to shareholders in 1982: the performance of insurance underwriting deteriorated significantly.
https://xuangubao.cn/article/426542
Buffett’s letter to shareholders in 1983: tell you the story of Mrs. B.
https://xuangubao.cn/article/426548
Buffett’s Letter to Shareholders in 1984: Investment Logic of Buffalo Evening News
https://xuangubao.cn/article/426565
Buffett’s letter to shareholders in 1985: Research failure is more important than research success.
https://xuangubao.cn/article/426568
Buffett’s letter to shareholders in 1986: stock performance can’t exceed the company’s profit performance forever.
https://xuangubao.cn/article/426571
Buffett’s letter to shareholders in 1987: insurance is still the biggest focus of business.
https://xuangubao.cn/article/426576
Buffett’s letter to shareholders in 1988: concentrate investment in a few companies that understand.
https://xuangubao.cn/article/426583
Buffett’s letter to shareholders in 1989: It is better to be quiet than to move.
https://xuangubao.cn/article/426589
Buffett’s Letter to Shareholders in 1990: Why Buy Wells Fargo?
https://xuangubao.cn/article/426593
Buffett’s Letter to Shareholders in 1991: A Candy Store for Twenty Years
https://xuangubao.cn/article/426599
Buffett’s letter to shareholders in 1992: buy good companies at reasonable prices
https://xuangubao.cn/article/426603
Buffett’s letter to shareholders in 1993: Better vague correctness than precise mistakes.
https://xuangubao.cn/article/426604
Buffett’s letter to shareholders in 1994: Buy at a reasonable price.
https://xuangubao.cn/article/426610
Buffett’s letter to shareholders in 1995: 2.3 billion bought 50% equity of GEICO.
https://xuangubao.cn/article/426612
Buffett’s letter to shareholders in 1996: We must avoid sowing the seeds of evil.
https://xuangubao.cn/article/426614
Buffett’s letter to shareholders in 1997: the probability of making money is much higher than losing money.
https://xuangubao.cn/article/426616
Buffett’s letter to shareholders in 1998: the company’s net worth increased by $25.9 billion.
https://xuangubao.cn/article/426834
Buffett’s letter to shareholders in 1999: the worst year of personal performance over the years.
https://xuangubao.cn/article/426836
Buffett’s Letter to Shareholders in 2000: We have completed eight mergers and acquisitions.
https://xuangubao.cn/article/426839
Buffett’s letter to shareholders in 2001: No one could have expected such a man-made disaster as September 11th.
https://xuangubao.cn/article/426840
Buffett’s letter to shareholders in 2002: We have no so-called "exit" strategy.
https://xuangubao.cn/article/426842
Buffett’s letter to shareholders in 2003: Care about the real value rather than the book value.
https://xuangubao.cn/article/426843
Buffett’s Letter to Shareholders in 2004: Impulse and cost are the enemies of investment.
https://xuangubao.cn/article/426844
Buffett’s Letter to Shareholders in 2005: The previous compound annual growth rate was 21.5%.
https://xuangubao.cn/article/426845
Buffett’s letter to shareholders in 2007: the past growth record can no longer be copied.
https://xuangubao.cn/article/426848
Buffett’s letter to shareholders in 2008: Our market value has shrunk by $11.5 billion.
https://xuangubao.cn/article/426860
Buffett’s Letter to Shareholders in 2009: Tell me what we won’t do.
https://xuangubao.cn/article/426863
Buffett’s Letter to Shareholders in 2010: Acquisition of North burlington Railway Company
https://xuangubao.cn/article/426865
Buffett’s Letter to Shareholders in 2011: Why Buy IBM?
https://xuangubao.cn/article/426867
Buffett’s Letter to Shareholders in 2012: Berkshire’s Four Major Investments
https://xuangubao.cn/article/426874
Buffett’s Letter to Shareholders in 2013: Two Big Acquisitions Completed by 18 Billion
https://xuangubao.cn/article/426885
Buffett’s Letter to Shareholders in 2014: Our Five Engines
https://xuangubao.cn/article/426886
Buffett’s letter to shareholders in 2015: a fruitful year
https://xuangubao.cn/article/426889
Buffett’s letter to shareholders in 2016: the net value increased by 27.5 billion US dollars.
https://xuangubao.cn/article/426893
Buffett’s letter to shareholders in 2017: very different from previous years.
https://xuangubao.cn/article/426897
Buffett’s Letter to Shareholders: 2018 Full Edition
https://mp.weixin.qq.com/s/p6__5EjkQYYbMe-fufL9Jw
The latest 2019 edition of Buffett’s Letter to Shareholders (full text in English and Chinese)
https://xuangubao.cn/article/426902