Warren Buffett‘s annual must-read Letter from the Chairman came out today with Berkshire Hathaway’s ($BRKB) Annual Report.
Because of the extraordinary circumstances of the Burlington Northern Railroad purchase, the ranks of Berkshire’s shareholders have swelled considerably; by Charlie Munger‘s count another 65,000 or so stockholders were added to the more typical 500,000 or so. I’ve certainly added to this total, bringing the B shares to clients who were not already shareholders in the days just prior to the 50 for 1 split.
In light of this influx of new investors, the report takes the time to reiterate the benchmarks by which the company measures itself and the core goals of the Berkshire organization.
Included in this ad hoc “freshman orientation course” is a reminder of the things that Berkshire Hathaway won’t ever do. Here’s an example:
We will never become dependent on the kindness of strangers. Too-big-to-fail is not a fallback position at Berkshire. Instead, we will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity. Moreover, that liquidity will be constantly refreshed by a gusher of earnings from our many and diverse businesses.
When the financial system went into cardiac arrest in September 2008, Berkshire was a supplier of liquidity and capital to the system, not a supplicant. At the very peak of the crisis, we poured $15.5 billion into a business world that could otherwise look only to the federal government for help. Of that, $9 billion went to bolster capital at three highly-regarded and previously-secure American businesses that needed – without delay – our tangible vote of confidence. The remaining $6.5 billion satisfied our commitment to help fund the purchase of Wrigley, a deal that was completed without pause while, elsewhere, panic reigned.
We pay a steep price to maintain our premier financial strength. The $20 billion-plus of cash- equivalent assets that we customarily hold is earning a pittance at present. But we sleep well.
Take the time to digest the entire letter this weekend, after all – the people you are trading/investing against in this market will be doing exactly that.
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