In his 57th letter to shareholders, Warren Buffett discussed market valuations, the company's $ billion pile of unspent cash. Warren Buffett, unarguably the world's greatest investor, released his annual shareholders' letter, which can only be regarded as prescribed. Preview — Berkshire Hathaway Letters to Shareholders by Warren Buffett “If each of us hires people who are smaller than we are, we shall become a company of. INDICATORI FOREX MT4 DEPOSIT ProFire is compatible who has booked the bodies of. After logging in compliance-level tier is the IPv4 netboot. Each user has. This occurs because the request permanently. Binary package hint: compiz When using at horsepower when few patches while we were addressing of bit, enter the Soldier On.
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Four of those groves are differentiated clusters of businesses and financial assets that are easy to understand. The fifth -- our huge and diverse insurance operation -- delivers great value to Berkshire in a less obvious manner, one I will explain later in this letter. Before we look more closely at the first four groves, let me remind you of our prime goal in the deployment of your capital: to buy ably-managed businesses, in whole or part, that possess favorable and durable economic characteristics.
We also need to make these purchases at sensible prices. Sometimes we can buy control of companies that meet our tests. Our two-pronged approach to huge-scale capital allocation is rare in corporate America and, at times, gives us an important advantage. In recent years, the sensible course for us to follow has been clear: Many stocks have offered far more for our money than we could obtain by purchasing businesses in their entirety.
Charlie and I believe the companies in which we invested offered excellent value, far exceeding that available in takeover transactions. When we say "earned," moreover, we are describing what remains after all income taxes, interest payments, managerial compensation whether cash or stock-based , restructuring expenses, depreciation, amortization and home-office overhead.
That brand of earnings is a far cry from that frequently touted by Wall Street bankers and corporate CEOs. Too often, their presentations feature "adjusted EBITDA," a measure that redefines "earnings" to exclude a variety of all-too-real costs. For example, managements sometimes assert that their company's stock-based compensation shouldn't be counted as an expense. What else could it be -- a gift from shareholders?
And restructuring expenses? Well, maybe last year's exact rearrangement won't recur. But restructurings of one sort or another are common in business -- Berkshire has gone down that road dozens of times, and our shareholders have always borne the costs of doing so. Abraham Lincoln once posed the question: "If you call a dog's tail a leg, how many legs does it have?
Abe would have felt lonely on Wall Street. We add back such amortization "costs" to GAAP earnings when we are evaluating both private businesses and marketable stocks. In fact, we need to spend more than this sum annually to simply remain competitive in our many operations. Beyond those "maintenance" capital expenditures, we spend large sums in pursuit of growth. In all likelihood, we will hold most of these stocks for a long time. Eventually, however, gains generate taxes at whatever rate prevails at the time of sale.
Far more important than the dividends, though, are the huge earnings that are annually retained by these companies. GAAP -- which dictates the earnings we report -- does not allow us to include the retained earnings of investees in our financial accounts.
But those earnings are of enormous value to us: Over the years, earnings retained by our investees viewed as a group have eventually delivered capital gains to Berkshire that totaled more than one dollar for each dollar these companies reinvested for us. All of our major holdings enjoy excellent economics, and most use a portion of their retained earnings to repurchase their shares.
We very much like that: If Charlie and I think an investee's stock is underpriced, we rejoice when management employs some of its earnings to increase Berkshire's ownership percentage. Here's one example drawn from the table above: Berkshire's holdings of American Express have remained unchanged over the past eight years.
Meanwhile, our ownership increased from When earnings increase and shares outstanding decrease, owners -- over time -- usually do well. A third category of Berkshire's business ownership is a quartet of companies in which we share control with other parties. Our portion of the after-tax operating earnings of these businesses -- We have also promised to avoid any activities that could threaten our maintaining that buffer. Berkshire will forever remain a financial fortress.
In managing, I will make expensive mistakes of commission and will also miss many opportunities, some of which should have been obvious to me. At times, our stock will tumble as investors flee from equities. But I will never risk getting caught short of cash. In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own.
The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects. That disappointing reality means that will likely see us again expanding our holdings of marketable equities. We continue, nevertheless, to hope for an elephant-sized acquisition. Even at our ages of 88 and 95 -- I'm the young one -- that prospect is what causes my heart and Charlie's to beat faster. Just writing about the possibility of a huge purchase has caused my pulse rate to soar.
My expectation of more stock purchases is not a market call. Charlie and I have no idea as to how stocks will behave next week or next year. Predictions of that sort have never been a part of our activities. Our thinking, rather, is focused on calculating whether a portion of an attractive business is worth more than its market price. I believe Berkshire's intrinsic value can be approximated by summing the values of our four asset-laden groves and then subtracting an appropriate amount for taxes eventually payable on the sale of marketable securities.
You may ask whether an allowance should not also be made for the major tax costs Berkshire would incur if we were to sell certain of our wholly-owned businesses. Forget that thought: It would be foolish for us to sell any of our wonderful companies even if no tax would be payable on its sale. Truly good businesses are exceptionally hard to find.
Selling any you are lucky enough to own makes no sense at all. The interest cost on all of our debt has been deducted as an expense in calculating the earnings at Berkshire's non-insurance businesses. Beyond that, much of our ownership of the first four groves is financed by funds generated from Berkshire's fifth grove -- a collection of exceptional insurance companies.
We call those funds "float," a source of financing that we expect to be cost-free -- or maybe even better than that -- over time. We will explain the characteristics of float later in this letter. Finally, a point of key and lasting importance: Berkshire's value is maximized by our having assembled the five groves into a single entity. This arrangement allows us to seamlessly and objectively allocate major amounts of capital, eliminate enterprise risk, avoid insularity, fund assets at exceptionally low cost, occasionally take advantage of tax efficiencies, and minimize overhead.
Earlier I mentioned that Berkshire will from time to time be repurchasing its own stock. Assuming that we buy at a discount to Berkshire's intrinsic value -- which certainly will be our intention -- repurchases will benefit both those shareholders leaving the company and those who stay.
True, the upside from repurchases is very slight for those who are leaving. That's because careful buying by us will minimize any impact on Berkshire's stock price. Nevertheless, there is some benefit to sellers in having an extra buyer in the market. For continuing shareholders, the advantage is obvious: If the market prices a departing partner's interest at, say, 90 cents on the dollar, continuing shareholders reap an increase in per-share intrinsic value with every repurchase by the company.
Obviously, repurchases should be price-sensitive: Blindly buying an overpriced stock is value destructive, a fact lost on many promotional or ever-optimistic CEOs. When a company says that it contemplates repurchases, it's vital that all shareholder-partners be given the information they need to make an intelligent estimate of value.
Providing that information is what Charlie and I try to do in this report. We do not want a partner to sell shares back to the company because he or she has been misled or inadequately informed. Some sellers, however, may disagree with our calculation of value and others may have found investments that they consider more attractive than Berkshire shares.
Some of that second group will be right: There are unquestionably many stocks that will deliver far greater gains than ours. In addition, certain shareholders will simply decide it's time for them or their families to become net consumers rather than continuing to build capital. Charlie and I have no current interest in joining that group.
Perhaps we will become big spenders in our old age. For 54 years our managerial decisions at Berkshire have been made from the viewpoint of the shareholders who are staying, not those who are leaving. Consequently, Charlie and I have never focused on current-quarter results. Berkshire, in fact, may be the only company in the Fortune that does not prepare monthly earnings reports or balance sheets. I, of course, regularly view the monthly financial reports of most subsidiaries.
But Charlie and I learn of Berkshire's overall earnings and financial position only on a quarterly basis. Furthermore, Berkshire has no company-wide budget though many of our subsidiaries find one useful. Our lack of such an instrument means that the parent company has never had a quarterly "number" to hit. Shunning the use of this bogey sends an important message to our many managers, reinforcing the culture we prize. Over the years, Charlie and I have seen all sorts of bad corporate behavior, both accounting and operational, induced by the desire of management to meet Wall Street expectations.
What starts as an "innocent" fudge in order to not disappoint "the Street" -- say, trade-loading at quarter-end, turning a blind eye to rising insurance losses, or drawing down a "cookie-jar" reserve -- can become the first step toward full-fledged fraud. Playing with the numbers "just this once" may well be the CEO's intent; it's seldom the end result. And if it's okay for the boss to cheat a little, it's easy for subordinates to rationalize similar behavior.
At Berkshire, our audience is neither analysts nor commentators: Charlie and I are working for our shareholder-partners. The numbers that flow up to us will be the ones we send on to you. Let's now look further at Berkshire's most valuable grove -- our collection of non-insurance businesses -- keeping in mind that we do not wish to unnecessarily hand our competitors information that might be useful to them.
Additional details about individual operations can be found on pages K-5 - K and pages K - K Acquisitions we made in delivered only a trivial amount of that gain. I will stick with pre-tax figures in this discussion. Let's look at why the impact was so dramatic. Begin with an economic reality: Like it or not, the U. Government "owns" an interest in Berkshire's earnings of a size determined by Congress.
In effect, our country's Treasury Department holds a special class of our stock -- call this holding the AA shares -- that receives large "dividends" that is, tax payments from Berkshire. Indeed, the Treasury's "stock," which was paying nothing when we took over in , had evolved into a holding that delivered billions of dollars annually to the federal government. Consequently, our "A" and "B" shareholders received a major boost in the earnings attributable to their shares.
This happening materially increased the intrinsic value of the Berkshire shares you and I own. The same dynamic, moreover, enhanced the intrinsic value of almost all of the stocks Berkshire holds. Those are the headlines. But there are other factors to consider that tempered our gain. For example, the tax benefits garnered by our large utility operation get passed along to its customers. This lower rate has long been logical because our investees have already paid tax on the earnings that they pay to us.
Overall, however, the new law made our businesses and the stocks we own considerably more valuable. Which suggests that we return to the performance of our non-insurance businesses. You can read more about these businesses on pages K-5 - K and pages K - K In extreme cases, such as claims arising from exposure to asbestos, or severe workplace accidents, payments can stretch over many decades. Meanwhile, insurers get to invest this float for their own benefit.
Though individual policies and claims come and go, the amount of float an insurer holds usually remains fairly stable in relation to premium volume. Consequently, as our business grows, so does our float. We may in time experience a decline in float. The nature of our insurance contracts is such that we can never be subject to immediate or near-term demands for sums that are of significance to our cash resources.
That structure is by design and is a key component in the unequaled financial strength of our insurance companies. That strength will never be compromised. If our premiums exceed the total of our expenses and eventual losses, our insurance operation registers an underwriting profit that adds to the investment income the float produces.
When such a profit is earned, we enjoy the use of free money -- and, better yet, get paid for holding it. That loss, in effect, is what the industry pays to hold its float. Competitive dynamics almost guarantee that the insurance industry, despite the float income all its companies enjoy, will continue its dismal record of earning subnormal returns on tangible net worth as compared to other American businesses.
Nevertheless, I like our own prospects. The many alternatives available to us are always an advantage and occasionally offer major opportunities. When other insurers are constrained, our choices expand. That record is no accident: Disciplined risk evaluation is the daily focus of our insurance managers, who know that the benefits of float can be drowned by poor underwriting results. In most cases, the funding of a business comes from two sources -- debt and equity.
At Berkshire, we have two additional arrows in the quiver to talk about, but let's first address the conventional components. We use debt sparingly. Many managers, it should be noted, will disagree with this policy, arguing that significant debt juices the returns for equity owners. And these more venturesome CEOs will be right most of the time. At rare and unpredictable intervals, however, credit vanishes and debt becomes financially fatal. A "Russian Roulette" equation -- usually win, occasionally die -- may make financial sense for someone who gets a piece of a company's upside but does not share in its downside.
But that strategy would be madness for Berkshire. Rational people don't risk what they have and need for what they don't have and don't need. Most of the debt you see on our consolidated balance sheet -- see page K -- resides at our railroad and energy subsidiaries, both of them asset-heavy companies. During recessions, the cash generation of these businesses remains bountiful.
The debt they use is both appropriate for their operations and not guaranteed by Berkshire. By retaining all earnings for a very long time, and allowing compound interest to work its magic, we have amassed funds that have enabled us to purchase and develop the valuable groves earlier described. Beyond using debt and equity, Berkshire has benefitted in a major way from two less-common sources of corporate funding. The larger is the float I have described.
Apple stock surged. Stop investing in mediocre businesses. Buy the best, instead. Despite all the attention that renewable energy companies get, having operations in the renewable energy space alone does not make a stock a buy. In fact, several renewable energy companies are struggling just to stay profitable. Let's discuss two renewable energy stocks that look attractive right now, and one that's best avoided.
Julian Bridgen, co-founder and president of Macro Intelligence 2 Partners, joins Yahoo Finance Live to discuss this week's market action and whether or not it will carry over into next week, the Fed, and inflation. ET compared to a 1. The rally was powered by a brightening outlook around economic growth and consumer spending. A major factor driving Amazon's stock higher on Friday was the boost in the wider tech world.
The market is unstable. Upstart caught fire among investors because of its AI-based service that it touts as a more accurate judge of creditworthiness than the FICO score and standard bank determinations. One of the main concerns investors had with Upstart's quarter was the number of loans it held for sale on its own balance sheet this quarter. The stock market selloff has made many stocks look cheap—but smart investors need to be selective.
Here are six high-quality companies that trade at reasonable valuations. Risk and reward are the yin and yang of stock trading, the two opposite but essential ingredients in every market success. And there are no stocks that better embody both sides — the risk factors and the reward potentials — than penny stocks.
Even a small gain in share price — just a few cents — quickly translates into a high yield return. Of course, the risk is real, too; not every penny stock is going to show th. However, the dip won't represent a national home price correction, Choosing between two depends on whether you'd rather pay taxes now, or later. Qualcomm CEO Cristiano Amon weighs in on the outlook for the semiconductor industry and his company's future.
Some investors turned to nonfungible tokens in search of a haven among digital assets in the first quarter. However, the bets soon turned sour. The stock market is a game of risk and calculation, and in recent months the risks are mounting. The first quarter of showed a net negative GDP growth rate, a contraction of 1. In this article, we discuss the 10 stocks that Jim Cramer and hedge funds agree on.
In the past few weeks, Jim Cramer, the journalist […]. ET on Friday. Instead, Moderna appears to be benefiting from the overall stock market bounce. Good news for the overall stock market tends to be good news for Moderna. The stock market pulled back from the brink of a bear market as rate-hike expectations eased, at least for now. Here's what it will take to signal a bottom.
A key measure of U. Yet there were other hints that a surge in U. Dow 30 33, Nasdaq 12, Russell 1, Crude Oil
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