Buffett’s Letters

Here are the posts that provide commentary on Warren Buffett’s letters to his Berkshire Hathaway shareholders, starting from 1977:

1) Buffett in 1977

• Return on Equity (ROE) should be the metric for evaluating Berkshire’s performance; Berkshire will keep the textile mills open despite a low ROE; insurance companies can only rarely differentiate products, hence the only economic moat is lowest cost.

2) Buffett in 1978

• Berkshire’s textiles are a commodity business; insurance underwriting discipline; the benefits of buying non-controlled businesses in the stock market.

3) Buffett in 1979

• Discusses valuing Berkshire and its long-term performance; inflation and relative business performance; analysis of bond investments.

4) Buffett in 1980

• Valuing Berkshire’s share of its non-controlled businesses; lauds GEICO and the managers of its other controlled businesses; more observations about the effect of inflation on business value.

5) Buffett in 1981

• On buying controlled v. non-controlled businesses; Compares relative attractiveness of American stocks to bonds, after accounting for taxes.

6) Buffett in 1982

• Using ROE to assess Berkshire’s performance; future insurance underwriting looks weak and Buffett explains the reasons why; using stock for acquisitions.

7) Buffett in 1983

• Discusses valuing Berkshire with book value, and assesses the “economic moats” of Nebraska Furniture Mart, Buffalo Evening News, and See’s Candies.

8) Buffett in 1984

• Discusses share repurchases; explores the efficiency at Nebraska Furniture Mart and the great business economics at the Buffalo Evening News; concludes by analyzing Washington Public Power bonds by the same metrics as he would a business.

9) Buffett in 1985

• Berkshire’s stock may now be overvalued; book value may overstate liquidation value; stock option compensation too often rewards earnings growth without discounting for the growth in incremental capital.

10) Buffett in 1986

• A quick look at Nebraska Furniture Mart and See’s Candies; Berkshire acquires Scott Fetzer and Fechheimer; Geico’s moat; the stock market looks expensive.

11) Buffett in 1987

• ROE and margins of the Sainted Seven are sky high; sky high ROE derive largely from businesses that change slowly; Berkshire’s moats in insurance derive from financial strength and their ability to tolerate fluctuations in earnings; CEOs and rational capital allocation.

12) Buffett in 1988

• Berkshire acquires Borsheim’s; the insurance industry is hated and unpopular; Buffett’s method for merger arbitrage; a few shots at efficient market theory

13) Buffett in 1989

• High retail margins need low operating costs; Berkshire writes some opportunistic reinsurance policies; and Buffett offers lessons on taxes, preferred stock investments, zero coupon bonds, and leverage.

14) Buffett in 1990

• Discusses “look through” earnings, buying Wells Fargo, and Mr. Market’s mania and depression.