BHLC: 2011 Notes and Reviews of Berkshire Hathaway Shareholder Letter

Notes on Berkshire Hathaway Shareholder Letter from 2011

Brief Summary of the Year:

Page 18 and 19 are probably some of the best investing advice I’ve ever heard. He covers inflation, value and the shenanigans in a quick fast 2 pages. Check them out.

This is, to me, a very regular year for Berkshire Hathaway. Insurance did phenomenally, everything else did well and they’ve got some new family members like Lubizol.

Notes For the Year:

“…we’ve now had nine consecutive years of underwriting profits, totaling about $17 billion.” – Warren Buffett

Wowza. How about getting paid $17 billion for hold someone else’s money.

“…our primary focus is on building operating earnings.” – Warren Buffett

That’s my primary focus too. Buffett is playing at a bit higher scale though. 😉

First rule of capital allocation – What is smart at one price, is dumb at another.

“Picking up that book was one of the luckiest moments in my life.” – Warren Buffett

Ben Graham’s The Intelligent Investor is the book Buffett credits for teaching him to have a love for low stock prices.

“That old line, “The other guy is doing it so we must as well,” spells trouble in any business” – Warren Buffett

As always, Buffett loves float and Ajit Jain -> Charlie would be happy to trade me for another Ajit. 🙂

“…our primary objectives of redundant liquidity and unquestioned financial strength.” – Warren Buffett

Objective of unquestioned financial strength. That’s what Berkshire does for the businesses it holds. The unquestioned financial strength helped them to turn around BNSF and NetJets. I think that’s their real value add for the companies they acquire. They never sell and they can take any financial requirements your business could possibly need. Especially if you’ve proven yourself as a powerful manager who can turn investment into returns.

“‘In God We Trust’ may be imprinted on our currency, but the hand that activates our government’s printing press has been all too human.” – Warren Buffett

 

“You can fondle the cube, but it won’t respond.” – Warren Buffett

This one requires context. In the letter Buffett is describing 3 types of investment. 1. Financial products like mutual funds and cash 2. Buy to sell at higher price things like gold or fine art 3. productive assett. The cube is alluding the all the worlds gold melted into a 68 foot block of pure gold worth $9 trillion +. You could have the Cube or the equivalent value in productive assets (all US agricultural land and 16 Exxon’s.) Which would you choose?

Productive assets are made up of Real Estate, Businesses and Agricultural properties. Buffett and Berkshire Hathaway choose Businesses. Makes me wonder where I should invest….

“What motivates most gold buyers is the belief that the ranks of the fearful will grow.” – Warren Buffett

Buffett really tears into the gold hoarders in this letter. It’s great to hear because I’ve been influenced in the past to think having gold on hand is a valuable way to retain wealth. Now it’s not. There is no way I’ll buy gold… I’d rather have a farm that makes apples or a company that makes money.

-Thanks for Reading. I hope you found this helpful. Please feel free to leave a comment and contribute to the conversation.

 

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