✉️ Warren Buffett published his annual letter to Berkshire Hathaway $BRK.B Shareholders this weekend. Here are the key takeaways:
💸Returns of 20.0% annually vs 10.2% for the S&P 500 $SPX500 in the last 56 years
Returning about 10% more than the market may not look so big but because of compound interest, it makes a big difference over time. $10 000 invested in the S&P 500 56 years ago is worth $2 million but $276 million in Berkshire Hathaway. 𝙄𝙣𝙫𝙚𝙨𝙩𝙞𝙣𝙜 𝙞𝙨 𝙖 𝙡𝙤𝙣𝙜-𝙩𝙚𝙧𝙢 𝙜𝙖𝙢𝙚.
💼Even if according to GAAP, only earnings of the companies they own at 100% and dividends from their stock investments should be counted as earnings of Berkshire Hathaway. Warren Buffett believes that this should not be the case. Even retained earnings from a company they have a minority ownership in should be counted as earnings to the shareholders of Berkshire since these earnings will be used by the business to grow in the future. In short, even if you own a few shares of a company, 𝙮𝙤𝙪’𝙧𝙚 𝙖𝙣 𝙤𝙬𝙣𝙚𝙧 𝙤𝙛 𝙩𝙝𝙚 𝙘𝙤𝙢𝙥𝙖𝙣𝙮, 𝙄𝙩 𝙞𝙨 𝙣𝙤𝙩 𝙟𝙪𝙨𝙩 𝙨𝙤𝙢𝙚 𝙣𝙪𝙢𝙗𝙚𝙧𝙨 𝙤𝙣 𝙖 𝙘𝙤𝙢𝙥𝙪𝙩𝙚𝙧 𝙨𝙘𝙧𝙚𝙚𝙣.
💰Bonds are bad investments with the low interest rate environment. Unlike other insurance businesses, Berkshire Hathaway have been able to 𝙪𝙨𝙚 𝙩𝙝𝙚 𝙛𝙡𝙤𝙖𝙩 𝙩𝙤 𝙗𝙪𝙮 𝙤𝙩𝙝𝙚𝙧 𝙗𝙪𝙨𝙞𝙣𝙚𝙨𝙨𝙚𝙨 𝙞𝙣𝙨𝙩𝙚𝙖𝙙 𝙤𝙛 𝙗𝙪𝙮𝙞𝙣𝙜 𝙗𝙤𝙣𝙙𝙨. Here there are four main businesses, Warren Buffett talks about:
1. The insurance business
2. BNSF (railroad)
3. Berkshire Hathaway Energy
4. Apple $AAPL of which they own 5.4% (initial purchase was 5.2% but because of buybacks and they even took some profits, it is now 5.4%)
🇺🇸 Another interesting investment of Berkshire Hathaway is BYD $01211.HK . A $232 million investment in 2008 is now worth over $5 billion. Although some of the largest investments are now in China and Japan, Warren Buffett still believes in American Exceptionalism and to 𝙉𝙚𝙫𝙚𝙧 𝘽𝙚𝙩 𝘼𝙜𝙖𝙞𝙣𝙨𝙩 𝘼𝙢𝙚𝙧𝙞𝙘𝙖.
Watch the full video on YouTube:
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