Quick: Let me ask you a question. What would you put a bet on? Which company goes to $1 trill first: Apple or Berkshire Hathaway?
Buffett: Oh, I’d bet on Apple just ’cause they’ve got a stronger position.
BERKSHIRE HATHAWAY INC.
By our estimate, a 120%-of-book price is a significant discount to Berkshire’s intrinsic value, a spread that is appropriate because calculations of intrinsic value can’t be precise.
For example, if the insurance industry should experience a $250 billion loss from some mega-catastrophe – a loss about triple anything it has ever experienced – Berkshire as a whole would likely record a large profit for the year. Our many streams of non-insurance earnings would see to that. Additionally, we would remain awash in cash and be eager to write business in an insurance market that might well be in disarray. Meanwhile, other major insurers and reinsurers would be swimming in red ink, if not facing insolvency.
GEICO’s growth accelerated dramatically during the second half of 2016. Loss costs throughout the auto-insurance industry had been increasing at an unexpected pace and some competitors lost their enthusiasm for taking on new customers. GEICO’s reaction to the profit squeeze, however, was to accelerate its new-business efforts. We like to make hay while the sun sets, knowing that it will surely rise again.
We expected significant losses in the early years while Peter built the personnel and infrastructure needed for a world-wide operation. Instead, he and his crew delivered significant underwriting profits throughout the start-up period. BHSI’s volume increased 40% in 2016, reaching $1.3 billion
Last year, for example, in a disappointing year for railroads, BNSF’s interestcoverage was more than 6:1.
To supply a very crude measure, however, our revenue per ton-mile was 3¢ last year, while shipping costs for customers of the other four major U.S.-based railroads ranged from 4¢ to 5¢.
Low prices are a powerful way to keep these constituencies happy. In Iowa, BHE’s average retail rate is 7.1¢ per KWH. Alliant, the other major electric utility in the state, averages 9.9¢.
Sometimes the comments of shareholders or media imply that we will own certain stocks “forever.” It is true that we own some stocks that I have no intention of selling for as far as the eye can see (and we’re talking 20/20 vision). But we have made no commitment that Berkshire will hold any of its marketable securities forever.
Berkshire, like most corporations, nets considerably more from a dollar of dividends than it reaps from a dollar of capital gains.
He is a hero … to me.
The annual meeting falls on May 6th and will again be webcast by Yahoo, whose web address is https://finance.yahoo.com/brklivestream. The webcast will go live at 9 a.m. Central Daylight Time.
Must Read: Very interesting analysis of Berkshire Hathaway (link here)
Stocks with low earnings volatility per unit of growth (aka who has the most stable earnings growth?)
Make sure you read this analysis from valueandopportunity.com about a company that pays 5,7% dividend and has a 10 Year Avg. ROE +22,8%. (link)
Detailed analysis about a common topic: “Do Investors Trade Too Much?”
Very interesting graph from Statista about the music industry:
You will find more statistics at Statista
They say that the whole global music industry generates $ 15 bn in sales. To take this in a perspective: Cisco is planing to buy back stock of that amount. Considering the share of mind music have in our lives, I see this as an enormously tiny number.