Warren Buffett - Berkshire Hathaway Letters to Shareholders

Warren E. Buffett first took control of Berkshire Hathaway Inc., a small textile company, in April of 1965. A share changed hands for around $18 at the time. Forty-eight letters to shareholders later, the same share traded for $134,060, compounding investor capital at just under 21% per yeara multiplier of 7,448 times.

Buffett has said many times that he was wired at birth to allocate capital. By allocating resources to assets and endeavors that have the greatest potential for gain, Buffett has guided Berkshire to creating enormous valuenot only for shareholders, but for the managers, employees, and customers of its holdings.

The numbers and charts you see on the following pages tell the story of a compounding machine. The rest of the book tells of the people, companies, and philosophy that drove it for more than 45 years.

In addition to providing an astounding case study on Berkshires success, Buffett shows an incredible willingness to share his methods and act as a teacher to his many students.

I put this compilation together as thanks to Warrens positive influence on myself and many, many others.

Max Olson
Salt Lake City, Utah

P.S. I owe a huge thanks to Tracy Britt, for working with me to finish this book, Deb Ray for scouring Warrens archives for the information I needed, and to Guy Spier for suggesting I make the book public.

ON THE COVER: Berkshire Cotton Manufacturing Company, MA (1898), Mason Machine Works. Mathat, Asa: Warren Buffett, Fortunes Most Powerful Women (2011).

Notes: Data are for calendar years with these exceptions: 1965 and 1966, year ended 9/30; 1967, 15 months ended 12/31. Starting in 1979, accounting rules required insurance companies to value the equity securities they hold at market rather than at the lower of cost or market, which was previously the requirement. In this table, Berkshires results through 1978 have been restated to conform to the changed rules. In all other respects, the results are calculated using the numbers originally reported.

The S&P 500 numbers are pre-tax whereas the Berkshire numbers are after-tax. If a corporation such as Berkshire were simply to have owned the S&P 500 and accrued the appropriate taxes, its results would have lagged the S&P 500 in years when that index showed a positive return, but would have exceeded the S&P 500 in years when the index showed a negative return. Over the years, the tax costs would have caused the aggregate lag to be substantial.

Market Price changes from 1965 to 1968 are based on the asking price for Berkshire shares in the days surrounding fiscal year end.

In 1929, several textile operations with much common ownership were amalgamated with Berkshire Cotton Manufacturing Co. (incorporated 1889), immediately renamed Berkshire Fine Spinning Associates, Inc. The merging mills were Valley Falls Co., Coventry Co., Greylock Mills, and Fort Dummer Mills, incorporated in 1853, 1865, 1880 and 1910 respectively. Although the documentation is not perfect, it is believed that the earliest progenitor of these corporations began business in 1806.