The 2016 Berkshire Hathaway Annual Report came out last Saturday, so naturally most of the news this week is about it.
Berkshire Hathaway's Operating Earnings Slip 6%
Berkshire Hathaway reported that its fourth-quarter net income grew about 15% compared with the year-ago period, helped by gains on its investments and derivatives portfolio. However, operating earnings, the metric Warren Buffett has long explained is the most important for understanding the company's true earnings power, declined about 6% to $4.4 billion, from $4.7 billion in the fourth quarter last year. [...]
Highlights From Warren Buffett’s 2016 Annual Letter
What we can take away from this brief discussion is that the gap between Berkshire’s book value and intrinsic value has grown over time and, with additional successful acquisitions, should continue to grow in the future. To be clear, important aspects of Berkshire’s results will show up in book value in the future. Berkshire’s retained earnings are fully reflected in book value. Additionally, changes in the value of marketable securities (with few exceptions) are also reflected in book value, net of deferred taxes. However, to the extent that the economic goodwill of Berkshire’s wholly owned subsidiaries continue to increase, the gap between book value and intrinsic value will continue to grow. [...]
Mixed Year at Berkshire Doesn’t Change Our View
There was little in wide-moat-rated Berkshire Hathaway's fourth-quarter and full-year results that would alter our long-term view of the firm. We do not expect to make any changes to our $255,000 ($170) per Class A (B) share fair value estimate or to our wide-moat rating. [...]
We remain impressed with Berkshire's ability to increase its book value per Class A equivalent share, which rose 10.7% year over year to $172,108 (higher than our own estimate of $167,878). This was aided by much stronger performance from its investment portfolio during 2016. The company closed out the year with $86.4 billion in cash on its books, up from $84.8 billion at the end of September and $71.7 billion at the end of 2015. [...]
Full transcript of billionaire investor Warren Buffett's interview with CNBC
"I absolutely look at individual stocks. It has nothing to do what the Federal Reserve, it has nothing to do with the election. As it does have, it would have something to do with interest rates if they did something extraordinary. It hasn't had, because they haven't been, they haven't changed that much. But there just were a couple of things I wanted 'em to do and we had the money. And I like investing. And I would much rather have that $20 billion in these companies that I don't look at it as being in stocks, I look at it as being in businesses. It's just small pieces of businesses. [...]"
Warren Buffett's Shareholder Letter: 5 Lessons for All Investors
There are few things more valuable for serious investors to read each year than Warren Buffett's annual letter to the shareholders of Berkshire Hathaway.
His letter for 2016, released early Saturday morning, is no exception. In it, Buffett covers his usual range of subjects, from the performance of Berkshire Hathaway and its operating units, to the future prospects of the United States, to advice for corporate executives and individual investors.
The whole letter is worth reading -- it is, after all, less than 30 pages long. But for those of you who want to view the highlight reel, here are my five favorite takeaways from Buffett's latest shareholder letter. [...]
Warren Buffett’s Berkshire Hathaway Bought 72 Million Shares of Apple in One Month
On Monday, Buffett told CNBC his insurance and investing conglomerate had bought 72 million of Apple's shares in the first month of January alone. He also owned up to the fact that Apple is one of the legendary investor's own stock picks, and not one chosen by his lieutenants. [...]
Berkshire started buying shares of Apple in mid-2016, and had 61 million shares by the end of the year. Buffett said Berkshire's Apple stake is now more than double that, and worth about $17 billion and amounts to 133 million shares. Buffett bought his most recent stake between Jan. 1 and Jan. 31—the day Apple reported that its sales rose $2.5 billion, or 3%, in the last three months of 2016, which was higher than expected. [...]
Berkshire Hathaway's Lubrizol takes $365 million loss on oilfield business
The company disclosed in its annual report Saturday that results at its chemical unit, Wickliffe-based Lubrizol, included pretax losses of $365 million last year related to the “disposition in the fourth quarter of an underperforming business.” No other details were provided in the document.
The business? Lubrizol’s Oilfield Solutions unit, according to Julie Young, a spokeswoman for the company. The division was created in late 2014 to house businesses purchased from Weatherford International Plc and Phillips 66, as well as some legacy operations. [...]
Buffett’s the Permabull-in-Chief. This is not the same as saying that he always believes it’s a great time to buy every stock or that he believes he has some edge on where stock prices will be this year or next. Because neither is true.
One of the hallmarks of Berkshire’s success has been its willingness to raise or lower its formidable cash hoard in response to the presence (or lack thereof) of viable investing opportunities. One of the other hallmarks of Buffett’s approach has been to tune out forecasts and de-emphasize the importance of them in general. [...]
Charlie Munger on Getting Rich, Wisdom, Focus, Fake Knowledge and More
"In the chronicles of American financial history," writes David Clark [...] "Charlie Munger will be seen as the proverbial enigma wrapped in a paradox— he is both a mystery and a contradiction at the same time."
On one hand, Munger received an elite education and it shows: He went to Cal Tech to train as a meteorologist for the Second World War and then attended Harvard Law School and eventually opened his own law firm. That part of his success makes sense.
Yet here's a man who never took a single course in economics, business, marketing, finance, psychology or accounting, and managed to become one of the greatest, most admired, and most honorable businessmen of our age, noted by essentially all observers for the originality of his thoughts, especially about business and human behavior. [...]
