Why Doesnt Berkshire Hathaway Pay a Dividend?

After the end of 1974, the Post had officially been a loser for Berkshire Hathaway, falling from a value of $10.6M to $8M. But Buffett had a conviction the company’s fortunes would turn, and he knew he had picked up the company at a great price, despite the fact that it had fallen even more. In 1973, Buffett made one of his most successful investments ever in the Washington Post. Berkshire had paid a small premium upon acquisition to account for the company’s subjective advantage over other candy stores, but just a couple years later, that advantage had increased and made See’s an even more robust and profitable business. And this was an advantage that Buffett was beginning to see was inflation-proof. Companies have both tangible assets and intangible assets, which include things like reputation and brand.

Last June after attending the BRK AGM I loaded up Max Olson’s anthology on my Kindle (just $2.50!) and over the course of the summer finished it. I used the Kindle’s built-in note-taking features to record the best quotes. The Oracle of Omaha is a nickname for Warren Buffett, chair and CEO of Berkshire Hathaway, who is arguably one of the greatest investors of all time. There is speculation, of course, that Buffett is preparing for more major acquisitions. In March 2022, Berkshire Hathaway announced that it had agreed to buy insurance company Alleghany Corp. for $11.6 billion, its first takeover since acquiring aircraft and industrial parts maker Precision Castparts Corp. in 2015. In its 2021 annual report, Berkshire Hathaway (BRK.A, BRK.B) reported full-year overall earnings of $89.8 billion and a $144 billion cash pile.

Look for companies that reinvest their earnings into growth

I’ve worked with Joe in the past, and he understands both Berkshire and insurance. Alleghany delivers special value to us because Berkshire’s unmatched financial strength allows its insurance subsidiaries to follow valuable and enduring investment strategies unavailable to virtually all competitors. Charlie and I watch with pleasure the vast flow of Berkshire-generated funds to public needs and, alongside, the infrequency with which our shareholders opt for look-at-me assets and dynasty-building. It was really fun to read through the history and see how Buffett went from small time to big time. Knowing the ending didn’t ruin the surprises about which investments panned out and which ones didn’t (some, like Coke, weren’t surprising, but others, like Blue Chip, were more so).

On April 23, 2010, Mitek acquired the assets of Dur-O-Wal from Dayton Superior. In August 2000, Berkshire Hathaway entered the building products business with the acquisition of Acme Building Brands. Headquartered in Fort Worth, Texas, Acme manufactures and distributes clay bricks , concrete block , and cut limestone . It expanded its building products business in December 2000, when it acquired Benjamin Moore & Co. of Montvale, New Jersey. Moore formulates, manufactures, and sells architectural coatings that are available primarily in the United States and Canada.

Additionally, managers conducting share repurchases demonstrate their shareholder-oriented mindset that Buffett values so highly. Under the right circumstances, there is very little that a manager can do to benefit his/her shareholders more than repurchasing undervalued shares. Buffett also believes that rather than being worried about how dilutive a merger can be in terms https://forexarena.net/ of per share earnings, what really counts is whether a merger is dilutive or anti-dilutive in terms of intrinsic business value. This emphasis on trading equal amounts of intrinsic business value ensures that neither party in any of Berkshire’s acquisitions will be taken advantage of, and is ultimately the most fair basis upon which to make a stock-for-stock transaction.

All letters in the book and the above samples are written and copyrighted by Warren E. Buffett and are reproduced with his permission. These letters must not be reproduced, copied, sold, or otherwise distributed without the permission of Warren E. Buffett. A full listing of all articles on The Rational Walk related to Berkshire Hathaway can be found in the article archive.

Warren Buffett Partnership Letters

A lot of them are wilting in bookshelves around the world waiting for a day when the owner inevitably bundles it into the charity box for donation. Book lovers have their own list but this list can never be definitive since there can be no universal consensus on what should go into “the toughest reads out there! Each person’s list, like the idea of utopia or hell, is personal and unique. Buffett is called the “Oracle of Omaha” or the “Sage of Omaha” and is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth. He also serves as a member of the board of trustees at Grinnell College.

Take his investment in the auto insurer GEICO — an acquisition that has been called Buffett’s best ever. Then there’s the corporate malfeasance possible when executives with a better understanding of their company’s value can leverage their own options into undeserved wealth. Berkshire Hathaway also owns just under 19% of American Express, 11.9% of Bank of America, and 9.8% of US Bancorp. It has purchased controlling stakes in some 60 companies, including well-known brands like GEICO, Dairy Queen, and Fruit of the Loom.

The articles that primarily cover topics discussed in the annual letters are listed in the grid below for easy reference. Some of these articles also cover related topics not directly discussed in the letters. In one of his famous letters to shareholders, Buffett said that perhaps Berkshire Hathaway might institute a dividend 10 or 20 years down the road. Instead, the company chooses to reinvest retained earnings into new projects, investments, and acquisitions. Buffett found success early with his fund, and managed returns close to 60% in 1968, compared to the Dow Jones’ 8% return. He was so successful that he had to turn away investors from his fund, even as he added more partnerships.

If a manager is able to employ all of company earnings internally at a high rate of return that will create over $1 of market value for every $1 retained, managers should do so. Buffett is a strong advocate of buying and holding equities for long periods of time, with minimal levels of activity . In his 1983 letter, he states his distaste for highly active investing, saying, “One of the ironies of the stock market is the emphasis on activity. Buffett’s attitude on management, while simple, has produced outstanding results at many of Berkshire’s subsidiary companies.

On Market Fluctuations

In his later letters, Buffett begins to closely examine corporate governance. At this point, Buffett has seen many CEO’s taking various actions that hurt their shareholders, including reckless acquisition and employing questionable accounting practices. Buffett contends that the true value of retained earnings lies in how effectively managers can employ them.

The meeting, scheduled to last 6–8 hours, is an opportunity for investors to ask Buffett and Munger questions. Barron’s said Berkshire was the most respected company in the world in 2007, based on a survey of American money managers. Each year, Warren Buffett writes an open letter to Berkshire Hathaway shareholders.

While Buffett has called out many titles on various occasions — at talks, meetings and annual conferences — he has also recommended a handful in several of his annual shareholder letters over the past 10 years. On the flip side, taking into account value or focus investing offers investors the opportunity to spend time analyzing the underlying principles of the companies they invest in, helping them feel a vested interest in their success. People can and should choose wisely based on what they see as effective business planning, and then hold onto these stocks even when they’re doing somewhat poorly, with faith that they will bounce back in time.

Berkshire Hathaway Letters to Shareholders (Paperback)

Over these same 63 years, the average market return was just under 10%, including dividends. Over this period, an average market return would have grown a $1,000 investment to $405,000 if all income had been reinvested. The 20% average return produced by Buffett over this period would have grown a $1,000 original investment to $97 million. Buffett only contemplates issuing additional shares of stock as part of an acquisition . In this event, the key question to Buffett is whether he can receive as much intrinsic business value as he gives. He views a stock-for-stock transaction to be a case in which both companies are making a partial sale of themselves.

• In spring 2001, Cisco’s shareholders had lost a total of 28.6% on their investment — yet CEO John Chambers took home $157M, mostly on his stock options (about $330,000 of that total consisted of direct, cash compensation).
• For Buffett, those intangible things are of the utmost importance for value-driven investors.
• In 1985, the last textile operations (Hathaway’s historic core) were shut down.

Most people have heard of Warren Buffett and are aware that he heads up the massive business Berkshire Hathaway. However, his history in the investing world stretches much farther back than Berkshire. The first time he struck out on his own was at the age of 25 when he started his first fund called the Buffett Partnership.

In his view, over-diversifying is just as much a problem as under-diversifying. On April 6, 2022, Berkshire Hathaway disclosed in its regulatory filing that the company had bought 121 million shares of HP Inc. valued at more than $4.2 billion. In May 2022, Berkshire Hathaway acquired a $2.6 billion stake in Paramount Global.

In his 2008 letter, Buffett relates how he and Charlie Munger realized immediately that the business was going to be a problem. He identifies several recent promising changes in the culture around boards of directors, including the profusion of women on boards and the mandating of “CEO-free” sessions where executives can speak frankly. On the other hand, he is deeply suspicious of what he sees as the modern-day trend of corporate boards incentivizing directors to be passive accomplices to whatever a CEO wants to berkshire hathaway letters to shareholders do. But, he adds, one should not take from any calamity the idea that America is in decline or at risk — life in America has improved dramatically just since his own birth, and is improving further everyday. While Buffett believes that other countries, particularly China, have very strong economic growth ahead of them, he is still bullish, above all, for his home turf of the United States. Some claimed the company lacked imagination and simply couldn’t figure out a more productive way to spend those billions.

When people blindly trust the values of the market and don’t do their due diligence, they may make reckless financial sales and investments, causing their own wealth to be less than its potential. Insurance and reinsurance business activities are conducted through approximately 70 domestic and foreign-based insurance companies. Berkshire’s insurance businesses provide insurance and reinsurance of property and casualty risks primarily in the United States. In addition, as a result of the General Re acquisition in December 1998, Berkshire’s insurance businesses also includes life, accident, and health reinsurers, as well as internationally based property and casualty reinsurers.

Albecca is headquartered in Norcross, Georgia, and primarily does business under the Larson-Juhl name. Albecca designs, manufactures, and distributes custom framing products, including wood and metal molding, matboard, foamboard, glass, equipment, and other framing supplies. CTB, headquartered in Milford, Indiana, is a designer, manufacturer, and marketer of systems used in the grain industry and in the production of poultry, hogs, and eggs.