For over a year now, I am a lawful owner of a piece of Bershire, albeit a very very small one. In any case, one of the many advantages of owning Bershire, peace of mind being the biggest one in my opinion, is that you get to read the Bershire Annual report. The report also contains Buffets annual letter to his investors. As always there are some amazing insights in the letter. Below I list some that I will treasure for some time to come:
(Note: The statements below are verbatim from the report; my comments are italicized)
1. However slow the economy, or chaotic the markets, our checks will clear (peace of mind I was talking about earlier)
2. Overwhelming portion of their (Berkshire businesses) future investments will be at home
3. Money will always flow toward opportunity, and there is an abundance of that in America
4. Human potential is far from exhausted
5. We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.
6. The challenge ofcourse is the calculation of intrinsic value (on how to value the company)
7. This “what-will-they-do-with-the-money” factor must always be evaluated along with the “what-do-we-have-now” calculation in order for us, or anybody, to arrive at a sensible estimate of a company’s intrinsic value (comment on the component of intrinsic value of company that depends on its shepherd)
8. At Berkshire our time horizon is forever
9. We must anticipate society’s needs, not merely react to them (on being major part of American economy’s circulatory system)
10. Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates.
11. The third best investment I ever made was the purchase of my home….The two best investments were wedding rings
12. Our country’s social goal should not be to put families into house of their dreams but rather to put them into a house they can afford
13. …-sensitivity to –risk (which in no way should be measured by beta, the choice of too many academics)
14. I believe that equity prices will very likely increase
15. Black-Scholes produces wildly inappropriate values when applied to long-dated options
16. Our inability to pinpoint a number (value for option) doesen’t bother us: We would rather be approximately right than precisely wrong
17. You can be highly successful as an investor without the slightest ability to value an option.
18. What students should be learning is how to value a business. That is all investing is about
19. A fundamental principle of auto racing is that to finish first you have to first finish
20. As we all learned in third grade – and some relearned 2008 – any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero (comment on leveraging)
21. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people.
22. Borrowers .. . learn that credit is like oxygen. When either is abundant, its presence goes unnoticed. When either is missing, its all that is noticed
