Using 2021 figures, there are 128 companies earning $3 billion or more, out of the S&P 500. Including Berkshire insurance, BHE (energy) and BNSF Railway, Berkshire is the largest owner of 11 of those 130 big giants (128 plus BHE and BNSF).
The letter has grown shorter in recent years. From 2010 to 2016, those were over 20 pages. From 2017 to 2021, those were 10+ pages. The 2022 letter is 10 pages.
When TTI’s founder was considering a sale, Berkshire was preferred over competitors and other financial buyers, as Berkshire won’t cut back-end jobs and won’t be a reseller.
“Teaching, like writing, has helped me develop and clarify my own thoughts.” – totally agree.
Berkshire’s structure – “Although our form is corporate, our attitude is partnership.”
There are two different type of individual investors with Berkshire – those own and trade stocks, and those “who simply trust us to represent their interests, whatever the future may bring”.
Berkshire has become the No.1 owner of US PP&E. The runner-up is AT&T.
Buffett and Munger on repurchases – “neither of us feels any urgency to buy an
estimated $1 of value for a very real 95 cents.”
One source of funding or leverage Berkshire has is deferred tax liabilities, which is a interest rate free loan. Those rose from unrealized gains and accelerated depreciation.
In the next annual letter, Buffett will not list book value per share any more; instead, the per share market value will be compared vs. S&P 500.
Redefining risk-free: “risk-free” long-term bonds in 2012 were a far riskier investment than a long-term investment in common stocks, as
investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.
Another lesson from Buffett – stick with big, “easy” decisions and eschew activity.
For certain stocks, Buffett has no intention to sell, however, those are still considered “available for sale” stocks.
Buffet’s tax lesson on dividends – “For a non-insurance company – which describes Berkshire Hathaway, the parent – the federal tax rate is
effectively 101⁄2 cents per $1 of dividends received. Furthermore, a non-insurance company that owns more than 20% of an investee owes taxes of only 7 cents per $1 of dividends. That rate applies, for example, to the substantial dividends we receive from our 27% ownership of Kraft Heinz, all of it held by the parent company.”
Buffett compared results of HFs vs. S&P 500 over the past 9 years. On average S&P 500 won.
Berkshire added the sixth “powerhouse”, which is Precision Castparts Corp for manufacturer aerospace components.
Haha I liked this quote – “utility was the only business that would automatically earn more money by redecorating the boss’s office”.
When technology changes “destroyed” some industries, what to do? Buffett suggested a better safety net for those “who are willing to work but find their specific talents judged of small value because of market forces. “. Well said I think.
Buffett added a new column for the “market” value of Berkshire’s share. This is important as “cost-based carrying value” was never revalued up. Thus, over time “the gap between Berkshire’s intrinsic value and its book value has materially widened”.
“a business with terrific economics can be a bad investment if it is bought for too high a price”.
Buffett recognized the investment failure in Tesco, and said he should have exited earlier.
Berkshire purchased both preferred shares and common shares of Heinz, partnering with 3G Capital. Buffett touted the partnership as a new model of investing, and says the difference between Berkshire and private equity firms is that “Berkshire never intends to sell a share of the company”.
“Games are won by players who focus on the playing field – not by those
whose eyes are glued to the scoreboard.” – focus less on current prices.
Buffett also sent a warning to the pension systems/policies of public entities.