Berkshire Hathaway 2014 Annual Report & Letter Roundup

The Berkshire Hathaway 2014 Annual Report and Warren Buffett's Letter to Shareholders was released today. This year's letter, celebrating the company's 50th anniversary of Buffett's ownership, also includes a special letter from Vice Chairman Charlie Munger.

• Buffett and Munger's Letters.
• The Annual Financial Report. This PDF also includes the letters, so if you download this one, you don't need the first link.

Don't have time to read the 148 page annual report? Here are some good articles I have found around the internet today that summarize and highlight.

Warren Buffett, Charlie Munger say their eventual departures won't slow Berkshire Hathaway (Omaha World Herald)

In an essay on the company’s past and future, Chairman and CEO Warren Buffett, 84, said it’s likely to keep growing but not as rapidly as in the past, and he said the company might pay its first dividend sometime in the next 10 or 20 years. Vice Chairman Charlie Munger, 91, writing directly to Berkshire shareholders for the first time, said that his and Buffett’s eventual departures won’t slow down the company and that Berkshire already has executives qualified to be CEO.

Warren Buffett vows never to spin off Berkshire Hathaway subsidiaries (Financial Times)

Warren Buffett has vowed never to spin off any of Berkshire Hathaway’s subsidiaries, in a full-throated defence of the “sprawling conglomerate” he has assembled over the past 50 years. [...] “Berkshire is now a sprawling conglomerate, constantly trying to sprawl further,” he said.

Warren Buffett knows who next Berkshire CEO is (CNN Money)

"The board and I believe we now have the right person to succeed me as CEO -- a successor ready to assume the job the day after I die or step down," he wrote in his latest annual letter to investors. Buffett added that the next Berkshire CEO would be someone that already works at Berkshire and is "relatively young." And while Buffett chose to be coy, Berkshire's vice chairman and long-time Buffett friend Charlie Munger seemed to suggest that it's a two-man race to succeed Buffett. Munger, in his own remarks in Buffett's letter, specifically named Berkshire reinsurance head Ajit Jain and Berkshire Energy CEO Greg Abel as "proven performers who would probably be under-described as 'world-class.'"

If you want a summary of the actual financials reported, there's this one:

Berkshire Hathaway net falls, operating profit rises (Reuters)

Net income fell to $4.16 billion, or $2,529 per Class A share, from $4.99 billion, or $3,035 per share, a year earlier. Quarterly operating profit rose 5 percent to $3.96 billion, or $2,412 per share, from $3.78 billion, or $2,297 per share. [...] Book value per share, which Buffett considers a good measure of Berkshire's worth, rose 8.3 percent from a year earlier to $146,186. For all of 2014, profit rose 2 percent to $19.87 billion, or $12,092 per share, while operating profit rose 9 percent to $16.55 billion, or $10,071 per share.

And finally, a really long one where Wall Street Journal writers live-blogged as they read the letter this morning. It's almost shorter to just read the letter than read their notes. But some of their commentary is interesting:

Analysis: Warren Buffett’s Annual Berkshire Letter (WSJ MoneyBeat)

We’ve read everything through a few times now, and one thing about this year’s letter stands out above all else: Mr. Buffett isn’t writing solely for the people who will read the letter this weekend. He’s clearly hoping this document will be one Berkshire’s leaders will look back on for decades to come. Scattered throughout are instructions to the men and women who will oversee Berkshire after he’s gone, even if they’re not always couched that way. For example, when he writes on page 9 that underwriting profitability “is a religion” at Berkshire’s insurance units, it’s a reminder to guard against a slippage in standards in that part of the company. And when he writes on page 28 that Berkshire’s CEO and board will be very careful before using stock to fund a future acquisition, it’ll later serve as a warning for those executives if they ever consider such a maneuver. And lest the board forget, he says that for a Berkshire CEO, “character is crucial.” He also says that “neither ego nor avarice” should drive him to earn as much as other CEOs of big-name companies. Other parts of the letter use far loftier rhetoric to rally the troops and look to the future. Berkshire rests on “a rock-solid formation” of the company’s existing big operating units. “Looking ahead, Charlie and I see a world made to order for Berkshire,” he says. “Our ambitions have no finish line.”

Berkshire News Briefs - 2/27/15

Berkshire to buy German motorcycle equipment retailer (Yahoo/Reuters)

Warren Buffett's Berkshire Hathaway Inc said on Friday it had agreed to buy German motorcycle apparel and accessories retailer Detlev Louis Motorrad-Vertriebs GmbH for a little more than 400 million euros [$452 million]. [...] Ute Louis, the widow of company founder Detlev Louis, had approached Berkshire about a possible transaction and sold the Hamburg-based company to a Berkshire unit, according to the law firm Beiten Burkhardt, which advised on the purchase. Antitrust approval is required, the law firm said. [...] Detlev Louis has annual sales of 270 million euros, employs more than 1,500 people, has more than 70 outlets in Germany and Austria, and serves 25 countries through online stores, its law firm said.

Fortune wins for finding the best stock photo for the story.

Buffett sets sights on German companies (Reuters)

In an interview with Handelsblatt newspaper on Wednesday, Buffett said that he liked German companies because of the regulatory and legal protection for investors, as well as the global reach of even smaller businesses, such as Detlev Louis Motorrad-Vertriebs, the motorcycle apparel and accessories retailer bought last week. "We are definitely interested in buying more German companies," told the newspaper. "Germany is a great market: lots of people, lots of purchasing power and Germans are productive. We also like the regulatory and legal framework."

Warren Buffett's Transparency Problem (Newsweek)

Berkshire Hathaway, the giant conglomerate run for nearly half a century by lionized investor Warren Buffett, is drawing scrutiny for being less than crystal clear about how it is so profitable. The questions from Wall Street analysts, insurance specialists and corporate governance experts put the spotlight on a behemoth with $517 billion in assets that in recent years has grown increasingly opaque with its financial disclosures. Better known for giving shareholders a staggering return of more than 693,000 percent since its birth in 1965, more than 70 times that of the S&P 500, Berkshire Hathaway, one of the world’s largest companies, is one of the least transparent corporations in America.

Buffett tells deputies to supervise newest Berkshire businesses (Chicago Tribune)

At least four of Berkshire's recent acquisitions — including one on Friday of German motorcycle-equipment retailer Detlev Louis Motorradvertriebs and the deal for battery- maker Duracell announced in November — will be overseen by Buffett's deputies. The arrangements put a twist on the loose, trust-based culture that Buffett, 84, has championed at his company. For years, he's had the chief executive officers of Berkshire's dozens of businesses report to him directly. By delegating more, he's freeing up his time and building capacity in an organization that will someday have to run without him.

MiTek Acquires M&M Manufacturing Company (Herald Online)

MiTek Industries, Inc. [...] announced today that it has acquired M&M Manufacturing, Fort Worth, Texas. M&M Manufacturing is one of the country’s largest producers of sheet metal products, primarily servicing the air distribution and ventilation market. M&M provides a comprehensive range of round, rectangular, oval and spiral ductwork, fittings and accessories for residential and commercial construction. MiTek is a subsidiary of Warren Buffett’s Berkshire Hathaway Inc.

Johns Manville Invests to Support Growth in Engineering Thermoplastics (Herald Online)

Alert readers will recall that JM announced another factory expansion in Ohio in last week's News Briefs post.

Johns Manville (JM), a market-leading manufacturer of glass fiber products and Berkshire Hathaway company, today announced it will expand its glass fiber operations plant in Etowah, Tenn., to service the increasing needs of the engineered thermoplastics industry. [...] The planned expansion in Etowah includes a new furnace to support the launch of the next generation of global products for reinforced thermoplastic composites. [...] The new furnace, due to start up in mid-2016, will allow for production growth and flexibility within JM’s product families for polyamides, polyesters and polypropylenes that are used in automotive, electrical and consumer applications.

Buffett and Berkshire Hathaway Inc. Get Bullish on Germany: 3 Key Takeaways for Investors (Fool Germany)

But as noted above, this may be a test case and a way for Berkshire to “dip its toes” in the German and European marketplace before jumping at bigger deals. And because Berkshire’s acquisition model is to buy companies and then let them operate without much interference, it can be a very attractive option for many owners. That may make this deal a signal to EU business leaders that Buffett has open ears for sellers from across the pond.

Donald R. Keough, Who Led Coca-Cola Through New Coke Debacle, Dies at 88 (New York Times)

Donald Keough was a member of the Berkshire Hathaway Board of Directors.

Donald R. Keough, who led Coca-Cola through the disastrous introduction of New Coke in 1985 and the return of the original formula just 10 weeks later, died on Tuesday in Atlanta, his family said. He was 88. [...] He also helped bring Warren E. Buffett, an old friend from Omaha, onto Coke’s board, where he served for 20 years. Berkshire Hathaway, Mr. Buffett’s investment firm, is Coca-Cola’s largest shareholder, and Mr. Buffett’s son Howard is on its board.

Group 1 director resigns citing Buffett-Van Tuyl deal (Auto News)

A Group 1 Automotive Inc. director has resigned, citing a potential conflict of interest related to her employer, Berkshire Hathaway, and its pending purchase of the Van Tuyl dealership group. The director, Beryl Raff, gave up her seat on Feb. 20, Group 1, the nation’s third-largest dealership group, said in an SEC filing today. [...] Raff has served on Group 1’s board since 2007. She has been the CEO of Helzberg Diamond Shops, an indirect, wholly owned subsidiary of Berkshire Hathaway Inc. since April 2009 [...] She remains on the boards of Helzberg Diamond, The Michaels Cos. Inc. and Helen of Troy Ltd., Bloomberg data show.

Warren Buffett's old Cadillac fetches $122,500 at auction (Reuters)

Warren Buffett's 2006 Cadillac attracted a high bid of $122,500, more than 10 times its market value, in a charity auction that concluded on Thursday night. The autographed DTS sedan, with 20,310 miles on the clock, was auctioned on the website Proxibid. A spokeswoman, Dana Kaufman, did not immediately identify the winner. Proceeds from the auction will go to Girls Inc of Omaha, Nebraska, the city where Buffett runs Berkshire Hathaway Inc.

Berkshire News Briefs - 2/19/15

Even Berkshire's Boardroom Ties Can't Prevent the Costco-AmEx Divorce (Bloomberg)

Billionaire Charles Munger, a director at Costco Wholesale Corp., has likened the company’s focus on expenses to a pious obligation and said the retailer does more to advance society than some large philanthropies. His ties with Costco were no help Thursday to American Express Co., the credit-card lender that’s one of the largest holdings of Warren Buffett’s Berkshire Hathaway Inc., where Munger is vice chairman. AmEx said its relationship with Issaquah, Washington-based Costco in the U.S. will end next year.

Lubrizol Corp. acquires Brazil-based coatings technology manufacturer (Crain's Cleveland Business)

Specialty chemicals company Lubrizol Corp. of Wickliffe said it has acquired a Brazilian company that makes coatings technology for products used in decorative paints, textiles, cement, elastomeric coatings and paper coatings. Terms of the purchase of the company, EcoQuimica Industria e Comercio Produtos Quimica Ltda., were not disclosed. EcoQuimica, headquartered in Paulínia, a municipality in the state of São Paulo, “will expand Lubrizol`s performance coatings footprint in the Latin America marketplace,” according to a news release.

Warren Buffett buys a stake in Rupert Murdoch's 21st Century Fox (Fortune)

In a quarterly filing with the Securities and Exchange Commission Tuesday, Berkshire revealed that it bought 4.7 million shares of the Rupert Murdoch-run company during the fourth quarter. The company was formed as the result of the 2013 split of News Corp.’s publishing and mass media businesses and, last year, Murdoch used it to make an unsuccessful run at buying rival Time Warner. Berkshire’s addition of the Fox stake follows last year’s investment in cable television provider Charter Communications.

Berkshire Sells ExxonMobil Stake: Did Warren Buffett Give Up on Big Oil? (Fool)

So here we are today; Berkshire's latest quarterly 13F statement is out, and its entire 41-plus million share stake -- worth roughly $3.7 billion -- in ExxonMobil is absent, indicating Berkshire sold out last quarter. That's less than two years after the company acquired almost the entire position in summer 2013.

Johns Manville Announces Major Upgrade to U.S. Nonwoven Glass Mat Production Facility (MarketWatch)

Johns Manville (JM), a global materials manufacturer and Berkshire Hathaway company, today announced a significant upgrade to its nonwoven glass mat production plant in Waterville, Ohio. Beginning in late 2015, JM will upgrade an existing nonwoven mat line with advanced manufacturing technology that will allow the company to better serve customers in growing segments of the global specialty glass mat market. JM anticipates the upgraded production line will be fully operational in early 2016. JM is the largest producer of specialty glass mat in North America and is an internationally recognized technology and quality leader. The company’s glass nonwoven products are used in a wide range of residential and commercial building as well as specialty industrial applications, including roofing shingles, carpet tile, vinyl flooring, office panels, ceiling tile, duct liner, exterior sheathing and energy storage.

Warren Buffett to speak at Nebraska Furniture Mart’s new store near Dallas (Omaha World-Herald)

Warren Buffett will be the guest speaker at a fundraiser April 8 at the Nebraska Furniture Mart’s new store north of Dallas. Buffett’s Berkshire Hathaway Inc. is the majority owner of the Omaha-based furniture retailer, which will raise money for the Cancer Support Community North Texas. The nonprofit organization provides free emotional and social support for cancer patients and their families in the Dallas-Fort Worth area. The Mart has not announced an opening date for the new store, its largest yet.

The ‘quiet’ Buffett sibling finds reason to make $100 million splash (Omaha World-Herald)

“Warren’s so famous, and my sister is kind of famous, too,” Roberta “Bertie” Buffett Elliott said. “I’m kind of the quiet one, but this was really exciting. I’m very happy.” Northwestern University’s international studies faculty and students are happy, too, because she gave $100 million to her alma mater, the largest donation in the university’s history. Older brother Warren is known worldwide as chairman and CEO of Berkshire Hathaway Inc., the Omaha-based conglomerate. Older sister Doris has attracted headlines by giving her fortune away through her Sunshine Lady Foundation.

Berkshire Hathaway 2014 4th Quarter 13F

Berkshire Hathaway released its quarterly 13F statement this week, detailing its stock holdings as of December 31st.

Dataroma has a nice format summarizing the changes:

Activity History
Current Holdings

The quick summary from MarketWatch:

Warren Buffett's Berkshire Hathaway dumps Exxon Mobil's stake, adds Deere (MarketWatch)

Warren Buffett's Berkshire Hathaway disclosed in a regulatory filing that it sold off its entire stake in Exxon Mobil while adding a new 24.7 million share stake in Deere & Co. during the fourth quarter. Berkshire also increased its stake in IBM Corp. to 76,971,817 shares as of Dec. 31 from 70,478,012 shares on Sept. 30, according 13H filings. The filings also indicated Berkshire held no shares of Exxon on Dec. 31, after holding 41,129,643 shares on Sept. 30. Separately, Berkshire increased its stake in MasterCard Inc. to 5.4 million shares from 4.7 million shares, boosted its holdings of Visa Inc. to 2.5 million shares from 2.15 million shares and cut its holdings of National Oilwell Varco to 5.26 million shares from 6.4 million shares.

The Street has a more in depth look at Berkshire's stock buys this quarter:

Top 10 Warren Buffett Stock Buys for 2015: IBM, Visa, Deere and More (The Street)

Today we're taking a closer look at 10 stocks that Buffett bought in the most recently reported quarter, based on Berkshire Hathaway's most recent quarterly 13F filing with the SEC, which reflects holdings as of Dec. 31, 2014. They are ordered by position size.

Berkshire News Briefs - 2/10/15

Warren Buffett: Know when to hold ’em (CNBC / Financial Times)

"No one who steps into his shoes will have Mr Buffett's authority or credibility," says Larry Cunningham, the law professor and author, who has published an annotated anthology of the letters. "To the extent that he can provide texts, rules, principles, it will all be very helpful. It will fortify the successor." Such fortification may be necessary in an age where hedge fund activists are gaining traction with their demands that companies spin off divisions, halt investment, add debt to the balance sheet and return cash to share-holders — actions which are anathema to Mr Buffett. Close followers of the company say talk of breaking up Berkshire will remain just that: talk. [...]

Warren Buffett’s first interview of the year (Fox Business Video)

This video is 40 minutes. Here's a shorter version, with some text highights and excerpts:

Here's What We Learned in Warren Buffett's Sit-Down With FBN's Liz Claman (Fox News)

Fox Business Network's Liz Claman sat down this afternoon for an exclusive live interview with Warren Buffett, as he marks 50 years since he started Berkshire Hathaway. Here's a summary of what we learned from the "Oracle of Omaha"

Buffett: Buying in Western Europe, eyeing Russia (CNBC)

Warren Buffett, Berkshire Hathaway's chief executive, said Wednesday his company will be buying a small business in Western Europe. "I'd love to buy big ones," he said. "I'd love to buy big ones." Buffett did not disclose the type of business Berkshire Hathaway is buying nor its exact location. He also added that while his company will be setting up shop in Western Europe in the near future, he is still monitoring the situation in Russia.

Warren Buffett faces pressure for more disclosure (Financial Times)

Free registration required, but FT is a worthwhile site to have an account on anyway.

Warren Buffett is under fire from investment analysts who cover his $370bn company, Berkshire Hathaway, over the quality of its financial disclosures. While Berkshire has grown to be the third-largest company on the US stock market, its quarterly filings reveal far less detail than companies of a similar size, according to the analysts, who all urged Mr Buffett to consider expanding disclosures, particularly about Berkshire’s large insurance businesses. Mr Buffett rejected the criticism, telling the Financial Times that Berkshire communicates “all the relevant factors for a long-term investment in the shares”.

Warren Buffett's media chief: Print newspapers have strong future if industry adapts (Irish Independent)

Journalists should prioritise their customers' desires rather than a particular platform, Terry Kroeger, president and chief executive of BH Media - a subsidiary of Warren Buffett's Berkshire Hathaway group - told a symposium on the future of local newspapers in Croke Park yesterday. Berkshire Hathaway has continued to expand its investment in newspapers despite continuing negativity about print journalism's future in the digital age. "The mistake that the consultants and prognosticators make is that they argue whether it's digital first or newspaper first. It's neither. The truth is the model that's most likely to work is customer first," Mr Kroeger said.

A company’s perspective on why wind energy matters (The Hill)

Good perspective on alternative energy written by a MidAmerican executive.

The largest economic development project in Iowa history isn’t by the real estate industry or even the ethanol industry. It’s by the wind industry. A Berkshire Hathaway company, MidAmerican Energy, is about halfway done with building up to $1.9 billion worth of wind farms in Iowa. We will be able to able to utilize wind resources in a manner that can represent the equivalent of about half the needs of our retail customers by 2016.

The S&P 500 Is Morphing Into the S&P 505 (Daily Finance)

I corrected this excerpt: it's Discovery Communications (DISCA/DISCK), not Discover Financial (DFS).

In the past, S&P has included only the class of shares that the general public could invest in. But last year, S&P decided to include both classes of shares for Google and [Discovery Communications]. [...] But it's not automatic that both classes of a company's stock will now be included in the index. In fact, 13 companies in the S&P 500 have multiple classes of stock, but only the five already named will have both included in the S&P 500. The biggest name that has two classes of stock but only one listed is Berkshire Hathaway, the giant conglomerate run by Warren Buffett. Silverblatt said Berkshire and the others do not meet liquidity and other criteria needed to include both classes of stock.

Warren Buffett adds to his lead in $1 million hedge-fund bet (Fortune)

Under the terms of the wager, Buffett is betting (with his own money, not Berkshire’s) on the stock market performance of an S&P 500 index fund while Protégé Partners, a New York money manager, is banking on five funds of hedge funds (the names of which have never been publicly disclosed) that Protégé carefully picked at the outset. Through the seven years, Vanguard’s 500 index fund, as represented by its Admiral shares, is up 63.5%. That’s the portfolio carrying Buffett’s colors. Protégé’s five hedge funds of funds are, on the average—the marker the bet uses—up an estimated 19.6%.

Warren Buffett’s Broker to Retire From Citigroup (WSJ MoneyBeat)

When Warren Buffett got a cell phone, the first call he made was to his stockbroker at Citigroup Inc. That broker, John Freund, still remembers the conversation. According to him, it was around the mid ’90s the famously low-tech Mr. Buffett called to say he wanted to try out his new phone. [...] That close relationship is the fruit of a decades-long partnership, where Mr. Freund has executed many of Mr. Buffett’s stock trades and been a confidant. Now, after more than 44 years at Citigroup or its predecessors, the Chicago-based managing director will retire in March.

Want to drive like a billionaire? Here's how (CNBC)

Described as a "once-in-a-lifetime opportunity," auction site Proxibid is offering the opportunity to own Warren Buffett's personal 2006 Cadillac DTS. Not only does the car boast only 20,310 miles, but it has a large autograph from the famed investor in "authentic sharpie." [...] The car is being auctioned by Girls Incorporated of Omaha, a charity that helps girls ages 5 though 18-years-old to be "strong, smart and bold." The proceeds of the auction will go to the organization.