2019 Buffett Letter

February 23rd, 2020

I’ve yet to read ALL of his letters but have had a habit of reading them each year. For those who don’t know, each year Warren Buffett does an annual letter, updating on the company, commentary on general market and outlook.

This year is no different, you can read it here.

Here is my highlighted version with a few comments.

See my PDF for highlights but having a read a few things stuck out to me:

  • Reminding shareholders of the power of retained earnings. Berkshire owns public stocks in companies that they can’t control or unlikely to get a controlling position. Each share is paying a dividend yet retaining earnings 2-3 times that of the share. I think as shareholders you expect the shares to go up but do forget the ‘entitlement’ you have – and that those retained earnings are an investment back in you. Something to think about before you hit sell on shares – but also on time frames. It takes years for retained earnings to pay ‘dividends’ pun intended.
  • He grumps on the change to GAAP rules which require reporting unrealized gains/losses. So suggests a focus on operating earnings, to better reflect the reality.
  • To achieve a reputation as a good manager, you must buy good businesses.
  • In insurance they need disciplined risk evaluation. I think all businesses need this, more frequently. Consistently evaluating the risk and making decisions accordingly. I’d argue that this is the hallmark of all Berkshire companies. And something I want to improve in mine.
  • He speaks on Berkshire Hathaway Energy, which has only had modest consumer price increases whilst investing in renewable energy.
  • Berkshire tax payments represented 1 1/2% of ALL corporate tax payments in America. Crazy that it is so high.
  • There was a shout out to the new book, Margin of Trust, on the culture at Berkshire. Which I’ll pick up and have a read.
  • He lays out thoughts on what will happen post-Warren era, which for anyone who hasn’t or is thinking about future planning, worth reading.

My takeaways, there has long been talk of what play with Berkshire do next. And the hints are overt, a big play in energy, he’s calling out their track record of consumer prices, investment in renewables but also as a customer of the tax system. Read, we have a play that we will probably want government support on.

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