Warren Buffett Letter to Berkshire Hathaway Shareholders 2021
โ๏ธ Warren Buffett published his annual letter to Berkshire Hathaway $BRK.B Shareholders this weekend. Here are the key takeaways:
๐ธReturns 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. ๐๐ฃ๐ซ๐๐จ๐ฉ๐๐ฃ๐ ๐๐จ ๐ ๐ก๐ค๐ฃ๐-๐ฉ๐๐ง๐ข ๐๐๐ข๐.
๐ผEven 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, ๐ฎ๐ค๐ชโ๐ง๐ ๐๐ฃ ๐ค๐ฌ๐ฃ๐๐ง ๐ค๐ ๐ฉ๐๐ ๐๐ค๐ข๐ฅ๐๐ฃ๐ฎ, ๐๐ฉ ๐๐จ ๐ฃ๐ค๐ฉ ๐๐ช๐จ๐ฉ ๐จ๐ค๐ข๐ ๐ฃ๐ช๐ข๐๐๐ง๐จ ๐ค๐ฃ ๐ ๐๐ค๐ข๐ฅ๐ช๐ฉ๐๐ง ๐จ๐๐ง๐๐๐ฃ.
๐ฐBonds are bad investments with the low interest rate environment. Unlike other insurance businesses, Berkshire Hathaway have been able to ๐ช๐จ๐ ๐ฉ๐๐ ๐๐ก๐ค๐๐ฉ ๐ฉ๐ค ๐๐ช๐ฎ ๐ค๐ฉ๐๐๐ง ๐๐ช๐จ๐๐ฃ๐๐จ๐จ๐๐จ ๐๐ฃ๐จ๐ฉ๐๐๐ ๐ค๐ ๐๐ช๐ฎ๐๐ฃ๐ ๐๐ค๐ฃ๐๐จ. 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%)
๐บ๐ธ 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 ๐๐๐ซ๐๐ง ๐ฝ๐๐ฉ ๐ผ๐๐๐๐ฃ๐จ๐ฉ ๐ผ๐ข๐๐ง๐๐๐.
Watch the full video on YouTube:
https://www.youtube.com/watch?v=BpbKXmV_VRg&list=UUPO3uUyoXSaFWG-Ldq1mqEQ&index=1
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