Berkshire Hathaway released its annual report over the weekend. Warren Buffett doesn’t say much new, but perhaps that is the point… He and Munger have been explicitly telling us for decades how they make their money. It is up to us to apply some of those lessons.
After a false start in textiles, Berkshire found success by growing the “float” of its insurance operations and using that upfront cash to invest in high quality, compounding businesses. These companies earn high returns independently, but the way in which they are brought under Berkshire’s umbrella is itself a source of strength. You might call it a moat – according to Buffett: “Berkshire’s positioning of its “controlled” businesses within a single entity endows it with some important and enduring economic advantages.”
It’s a highly successful model that has seen Berkshire become one of the biggest companies in the world, with a single “A” share worth as much as a house and a market cap of some £433bn.
In many ways, Berkshire is the blueprint for quality. Warren Buffett’s annual letters to shareholders are required reading for many.
On the 22nd of February, Buffett’s 2019 Shareholders Letter was published. Here are…
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