Warren Buffett’s Annual Letter to Shareholders
Warren Buffett’s letter is very upbeat with respect to Berkshire’s accomplishments in 2011. Despite the slow economic recovery, each of its five largest non-insurance companies (BNSF, Iscar, Lubrizol, Marmon Group, and Mid-American Energy) delivered record earnings. Buffett also has an optimistic outlook for the stock market, stating that the S&P 500 may well be in the process of establishing a five year winning streak.
There were three points that I found most interesting:
(1) As a large shareholder in IBM, Buffett hopes that IBM’s shares languish over the next few years so IBM’s ongoing stock buyback program can result in the purchasing of more shares for the amount invested.
(2) He was “late” in investing in Coca-Cola in 1988, BNSF in 2006, and IBM in 2011 because it took awhile for his thoughts to crystallize. Buffett quotes Thoreau: “It’s not what you look at that matters, it’s what you see.”
(3) Buffett has set up a very interesting incentive structure with respect to his two new portfolio managers, Todd Combs and Ted Weschler. Each will earn 80% of his performance compensation from his own results, and 20% from his partner’s. This should encourage cooperation and the sharing of investment ideas between Combs and Weschler.
and this Bloomberg article on this subject:
