WEB's annual letter

[kiwing100]

 

FYI, just read a news article that WEB's annual letter is due out this weekend. 

[ATLValue]

thanks for the heads up!

[Charlie]

CNBC has been advertising that they will have Buffett on for three hours on Monday February 29th following the weekend earnings release.

He will be on 6 to 9 am eastern time.

 

Cheers!  :)

[merkhet]

CNBC has been advertising that they will have Buffett on for three hours on Monday February 29th following the weekend earnings release.

He will be on 6 to 9 am eastern time.

 

Cheers!  :)

 

Excellent. Setting my TiVo. Thanks!

[Guest notorious546]

what time does it come out

[Dustin T]

what time does it come out

 

Should post Saturday morning by 7 or 8am Eastern time.

[John Hjorth]

Yes, Saturday 8:00 AM Eastern time :

 

http://www.berkshirehathaway.com/news/FEB2516.pdf .

[Dynamic]

If you want a good idea of the expected publication date of Annual Reports and quarterly figures ahead of time, you might like to check Google Finance. On the lower right column of the Berkshire Hathaway page (on a desktop computer) there's a calendar which has shown Saturday 27th Feb (estimated) for at least a month, I think.

 

That gave me confidence recently to wait for a decent combination of high price on the stock I was selling and low price for buying BRK and still trade before the next financials are released.

 

Despite its foibles, I've found Google Finance pretty useful lately as many of its features like EPS can be accessed from Google Sheets and I use a Sheets spreadsheet to track my portfolio and watchlist and give an quick and dirty indication of what's selling cheaply or expensively at any time.

[John Hjorth]

I found this reading guide for the Annual Report today on The Rational Walk :

 

How to Read the Berkshire Hathaway Annual Report

www.rationalwalk.com/?p=13696

 

I will try to follow it tomorrow.

 

 

 

[kiwing100]

 

It's out -

 

http://www.berkshirehathaway.com/letters/2015ltr.pdf

[sleepydragon]

 

It's out -

 

http://www.berkshirehathaway.com/letters/2015ltr.pdf

 

"Berkshire’s gain in net worth during 2015 was $15.4 billion, which increased the per-share book value of

both our Class A and Class B stock by 6.4%. Over the last 51 years (that is, since present management took over),

per-share book value has grown from $19 to $155,501, a rate of 19.2% compounded annually.*"

 

Something I don't understand.  15.5 billion / 6.4% = 240billion.  Doesn't that give me the book value? But it seems not right when I compare this number with the $155,501/share book value in the above sentence.  Could someone please explain to me? :) Thanks!!

 

[sleepydragon]

 

It's out -

 

http://www.berkshirehathaway.com/letters/2015ltr.pdf

 

"Berkshire’s gain in net worth during 2015 was $15.4 billion, which increased the per-share book value of

both our Class A and Class B stock by 6.4%. Over the last 51 years (that is, since present management took over),

per-share book value has grown from $19 to $155,501, a rate of 19.2% compounded annually.*"

 

Something I don't understand.  15.5 billion / 6.4% = 240billion.  Doesn't that give me the book value? But it seems not right when I compare this number with the $155,501/share book value in the above sentence.  Could someone please explain to me? :) Thanks!!

 

He also says: "Last year, for example, book-value performance was superior".

So 6.4% is superior?

[thepupil]

Book Value Gain > MV Gain, therefore it was superior

 

 

Simple Definition of superior

: of high quality : high or higher in quality

: great or greater in amount, number, or degree

: better than other people

 

The unrecorded increase in the value of our owned businesses explains why Berkshire’s aggregate market- value gain – tabulated on the facing page – materially exceeds our book-value gain. The two indicators vary erratically over short periods. Last year, for example, book-value performance was superior. Over time, however, market-value gains should continue their historical tendency to exceed gains in book value.

 

[sleepydragon]

Book Value Gain > MV Gain, therefore it was superior

 

 

Simple Definition of superior

: of high quality : high or higher in quality

: great or greater in amount, number, or degree

: better than other people

 

The unrecorded increase in the value of our owned businesses explains why Berkshire’s aggregate market- value gain – tabulated on the facing page – materially exceeds our book-value gain. The two indicators vary erratically over short periods. Last year, for example, book-value performance was superior. Over time, however, market-value gains should continue their historical tendency to exceed gains in book value.

 

I see. thanks!

1.2 * 2015 Book value = 186601.2

The 52 weeks low of BRKa is 186,900.00, or 0.1% higher. wow!

 

 

[John Hjorth]

sleepydragon,

 

Numbers explanation of the 6.4%:

 

Berkshire Hathaway shareholder's equity per outstanding Class A equivalent common share end 2014 [uSD 146,186] X 1.064 ~

Berkshire Hathaway shareholder's equity per outstanding Class A equivalent common share end 2015 [uSD 155,501]

 

[Figures: Annual Report p. 34]

[sleepydragon]

sleepydragon,

 

Numbers explanation of the 6.4%:

 

Berkshire Hathaway shareholder's equity per outstanding Class A equivalent common share end 2014 [uSD 146,186] X 1.064 ~

Berkshire Hathaway shareholder's equity per outstanding Class A equivalent common share end 2015 [uSD 155,501]

 

[Figures: Annual Report p. 34]

 

But what is the Total book value. Is it: 15.5 billion / 6.4% = 240billion?

Is so, the mktcap is 330 billion. It seems a much bigger gap than the per share numbers?

 

[Guest longinvestor]

From the Intrinsic Value Section,

 

Here is an update of the two quantitative factors: In 2015 our per-share cash and investments increased

8.3% to $159,794 (with our Kraft Heinz shares stated at market value), and earnings from our many businesses –

including insurance underwriting income – increased 2.1% to $12,304 per share. We exclude in the second factor

the dividends and interest from the investments we hold because including them would produce a double-counting

of value. In arriving at our earnings figure, we deduct all corporate overhead, interest, depreciation, amortization

and minority interests. Income taxes, though, are not deducted. That is, the earnings are pre-tax.

 

IV?

$160K + 10x $12.3k = $283 k/A share

          + 12x $12.3k = $308 k/A share

 

If we really go crazy,

          +15x $12.3k = $345 k/A share    (that would make WEB's 1.2x BV buy back a 50 cent -dollar purchase)

 

Tilson's August 2015 estimate was $275K and a projection of $305K in a year from then. We're there now, ha!

 

 

 

 

[John Hjorth]

sleepydragon,

 

Numbers explanation of the 6.4%:

 

Berkshire Hathaway shareholder's equity per outstanding Class A equivalent common share end 2014 [uSD 146,186] X 1.064 ~

Berkshire Hathaway shareholder's equity per outstanding Class A equivalent common share end 2015 [uSD 155,501]

 

[Figures: Annual Report p. 34]

 

But what is the Total book value. Is it: 15.5 billion / 6.4% = 240billion?

Is so, the mktcap is 330 billion. It seems a much bigger gap than the per share numbers?

 

Your calculations makes no sense. Total book value is equal to total shareholders equity ex. non controlling interests [M USD 255,550][Annual Report p. 37]

[Cevian]

Warren has had an huge impact on my life (financial and other). He is my hero and original Jedi Master. I have been a Berkshire Shareholder for a two decades and consider what he has accomplished a true Miracle and a Fort Knox.

 

Having said that, I'm open to disagreeing with him on political and economic outlook. If we assume a $19 Trillion Debt level with a 320 million population, I believe we have a per capita debt (i.e. per head) of $59,000 in the US. Please correct me if I'm wrong.

 

How can this be a positive thing? How much is this compared to 1930? I don't agree with the always rosy outlook picture of things. "All will be well!". "Greatest country in the world!" "We're the best and always will be!"

[AzCactus]

I wouldn't really expect him to say I'm 85 going on 86 have 50 plus billion and things look shitty lol

[vinod1]

If we assume a $19 Trillion Debt level with a 320 million population, I believe we have a per capita debt (i.e. per head) of $59,000 in the US. Please correct me if I'm wrong.

 

How can this be a positive thing? How much is this compared to 1930? I don't agree with the always rosy outlook picture of things. "All will be well!". "Greatest country in the world!" "We're the best and always will be!"

 

One man's debt is another man's asset.

 

Well that is $59,000 of assets per each US citizen. I know some of it is held by foreigners.

 

Then look at this this way, US mostly makes direct investments (equity) whereas foreigners own US debt. The return that US gets on their equity investments (FDI) is much higher than the interest paid on the debt.

 

Vinod

[LongTermView]

I like the part about risk, including driverless cars:

We, like all public companies, are required by the SEC to annually catalog “risk factors” in our 10-K. I can’t remember, however, an instance when reading a 10-K’s “risk” section has helped me in evaluating a business.  That’s not because the identified risks aren’t real. The truly important risks, however, are usually well known. Beyond that, a 10-K’s catalog of risks is seldom of aid in assessing: (1) the probability of the threatening event actually occurring; (2) the range of costs if it does occur; and (3) the timing of the possible loss. A threat that will only surface 50 years from now may be a problem for society, but it is not a financial problem for today’s investor.

 

Berkshire operates in more industries than any company I know of. Each of our pursuits has its own array of possible problems and opportunities. Those are easy to list but hard to evaluate: Charlie, I and our various CEOs often differ in a very major way in our calculation of the likelihood, the timing and the cost (or benefit) that may result from these possibilities.

 

Let me mention just a few examples. To begin with an obvious threat, BNSF, along with other railroads, is certain to lose significant coal volume over the next decade. At some point in the future – though not, in my view, for a long time – GEICO’s premium volume may shrink because of driverless cars. This development could hurt our auto dealerships as well. Circulation of our print newspapers will continue to fall, a certainty we allowed for when purchasing them. To date, renewables have helped our utility operation but that could change, particularly if storage capabilities for electricity materially improve. Online retailing threatens the business model of our retailers and certain of our consumer brands. These potentialities are just a few of the negative possibilities facing us – but even the most casual follower of business news has long been aware of them.

 

None of these problems, however, is crucial to Berkshire’s long-term well-being. When we took over the company in 1965, its risks could have been encapsulated in a single sentence: “The northern textile business in which all of our capital resides is destined for recurring losses and will eventually disappear.” That development, however, was no death knell. We simply adapted. And we will continue to do so.

 

[rmitz]

sleepydragon,

 

Numbers explanation of the 6.4%:

 

Berkshire Hathaway shareholder's equity per outstanding Class A equivalent common share end 2014 [uSD 146,186] X 1.064 ~

Berkshire Hathaway shareholder's equity per outstanding Class A equivalent common share end 2015 [uSD 155,501]

 

[Figures: Annual Report p. 34]

 

But what is the Total book value. Is it: 15.5 billion / 6.4% = 240billion?

Is so, the mktcap is 330 billion. It seems a much bigger gap than the per share numbers?

 

Your calculations makes no sense. Total book value is equal to total shareholders equity ex. non controlling interests [M USD 255,550][Annual Report p. 37]

 

The missing piece of his calculation is that 15.5B/6.4% = 240B, but that is the starting point for last year, so you re-add 15.5B, which matches your number.

[sleepydragon]

sleepydragon,

 

Numbers explanation of the 6.4%:

 

Berkshire Hathaway shareholder's equity per outstanding Class A equivalent common share end 2014 [uSD 146,186] X 1.064 ~

Berkshire Hathaway shareholder's equity per outstanding Class A equivalent common share end 2015 [uSD 155,501]

 

[Figures: Annual Report p. 34]

 

But what is the Total book value. Is it: 15.5 billion / 6.4% = 240billion?

Is so, the mktcap is 330 billion. It seems a much bigger gap than the per share numbers?

 

Your calculations makes no sense. Total book value is equal to total shareholders equity ex. non controlling interests [M USD 255,550][Annual Report p. 37]

 

The missing piece of his calculation is that 15.5B/6.4% = 240B, but that is the starting point for last year, so you re-add 15.5B, which matches your number.

 

thanks!

[Dynamic]

Once you've read it and decided for yourself, Blomberg's link to an Annotated version may be an interesting read.

 

http://www.bloomberg.com/news/features/2016-02-27/warren-buffett-s-2015-shareholder-letter-annotated

 

There's also a mobile or tablet version where the comments are listed separately and having read the letter first, I could make sense of almost all of the annotations without clicking to find the underlined text they referred to.