Berkshire Hathaway Inc just issued its latest Chairman’s letter for 2014. For all value investors, reading the annual letter from Warren Buffett is a MUST. So, I have just finished it this week. Here are my top 5 key points from the 43 pages long letter.
- Berkshire Hathaway started out with a market capitalisation of US$18 million in 1965 and has a market capitalisation of US$370 billion today. That is an 18,262-baggers with an annual return of 21.6% over the past 50 years.
- Investing in Berkshire Hathaway was actually a mistake for Warren Buffett. And he continue to invest in Berkshire Hathaway because of his ego. He refused to sell his Berkshire shares when the then-Chairman promised him a price of $11.50 per share but only officially offer an eighth of a point less. He went on a buying spree to takeover the company.
- The decentralized management model of Berkshire Hathaway is unique and most company would find it hard to duplicate.
- Charlie Munger, the company’s vice Chairman, plays a high role in turning Buffett’s investment strategy of “buying a fair business at a wonderful price” to one that focus on “buying a wonderful business at a fair price”.
- Conglomerate does not always be considered as a bad thing. Berkshire Hathaway is a pure example of how a conglomerate can be utilized to save cost in financing for its subsidiaries and add valuable advantage to its subsidiaries compared to if they are just a separate company. Areas that are advantages for a conglomerate is capital allocation, tax efficiency and showing potential acquisition targets that Berkshire Hathaway can be a great home for them.
Although Buffett is already 84 years old and he has been writing his annual letters for 50 years now, his yearly letter is still educating and entertaining as always.
To end it off, here are Berkshire Hathaway top common stock investments at the end of 2014. Enjoy.
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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Stanley Lim’s personal capacity and do not in any way represent those of his employer and other related entities. Stanley Lim owns Berkshire Hathaway Inc.