Berkshire Hathaway Letter 2024

https://www.berkshirehathaway.com/2024ar/2024ar.pdf

Moving my post to the new Forum:

Wow! My first letter read and I must start with stating that i am surprised and appreciative that Warren Buffett is such a good writer. I would more often than not think that it would be a boring endeavor to read a shareholder letter from a business. More a labor of love than one of true enjoyment. I stand corrected. It was quite elucidating and enjoyable to read. Lots of good nuggets of wisdom as well as humor sprinkled throughout. I want to clarify that i do not consider myself an expert by any stretch of the imagination in this world and am using this as a tool to share what i learn with the community, but also to more clearly understand my thinking to myself. That being said, Let's get to it!

I have read the 2024 letter on first pass and will have it up next to me as i write this, so my synthesis will follow the order of the letter itself.

Right away i see two useful models mentioned. One of successful "Capital Allocation" and the other batting averages. Capital Allocation being the deploying of money for intended returns of more money in the future. Essentially the core of Berkshire Hathaway and what we our doing as Intelligent Investors. This simple idea helps frame what it means to be an investor. Not someone who buys/sells stocks or assets, those are traders, but someone who wisely deploys money/resources in missions and businesses that they believes in and understands how that capital is to be utilized. Secondly, batting average. Nobody is perfect, especially Mr. Buffett by his own admission. We will not be either. Understanding that will provide the ability for honest self assessment and allowance for mistakes. Creating the flexibility and recognition to change course as needed. When a mistake is realized it is best to recognize and act, as Charlie says in the letter: "Do not delay. Stop "Thumb-sucking"." Act and deal with the discomfort that comes from your mistake, then learn and move forward.

Berkshire aims to own wonderful companies run by wonderful people. Makes sense to me. In the mentioning of Forest River (an RV company), Buffett discusses how wonderful of a business man Pete Liegl (Founder/CEO) was until the day of his passing. He came to Berkshire and asked to be acquired for the financial security of his family, but wanting to continue running the business. He did so. Buffett uses this story to share how beneficial it is to have a high fidelity and highly skilled person in charge. This is one of a few homeruns that Buffett has hit in his life and is sharing the wisdom of what he learned. People matter.

In discussing the prior years performance Buffett emphasizes his metric of Operating Earnings. This concept is the earnings of the business excluding the realized or unrealized gains and losses from capital. This is a more accurate evaluation of the ability of the business to generate profits as it does not account for the highly volatile market value of held or sold securities. They obviously expect to make money with the securities, why else buy them?, but do not believe this to be reflective of the underlying business.

I am going to skip the part on taxes other than saying Buffett is happy to pay taxes because that means the company is doing well. He attributes this to the shareholders being willing to have earnings reinvested rather than distributed through dividends.

Buffett talks about it being harder to operate as such a large entity to find opportunities to successfully deploy their capital. They are few and far between for such a large cash pile. For us as smaller investors it is much easier. We do not affect the market. We can come and go as we please. This is not true for Berkshire. He does mention that minority stakes in companies (stock ownership less than 50%) does not allow for course correction of the business from afar. They are subject to the follies of the business. This is relevant because that is the position that we find ourselves in as everyday investors. We are subject to the businesses decisions and must live with its consequences. That is why we must wisely evaluate the company before we decide to purchase small ownership in it.

In the section about P/C insurance i would say it is well written and worth a read, but i don't have anything to share other than that again they had a competent CEO come in and revamp their GEICO underwriting business. Lots of interesting insights into the insurance business which can be helpful to us everyday citizens who are impacted by insurance and insurance claims.

Japan has become a source of foreign investment for Berkshire. This is because they believe in the strength of the Japanese economy and the ability for their corporations to successfully utilize and deploy capital as well as management teams and attitudes towards investors. The five companies they invested in are: "ITOCHU, Marubeni, Mitsubishi, Mitsui and Sumitomo. Each of these large enterprises, in turn, owns interests in a vast array of businesses, many based in Japan but others that operate throughout the world."

That is all I have for the first letter. I hope that you found some value in this read, i know i benefitted from writing it. Definitely was more depth than i was anticipating. One a day now seems a bit ambitious. I will do what i can though!