Buffett Summarizes 2012 Performance

 

Omaha, NE, March 11, 2013--Berkshire Hathaway, owner of Shaw Industries, released its 2012 Annual Report on March 1. In his letter to shareholders, the company's CEO, Warren Buffett, summarized the company's performance for the year.  

"In 2012, Berkshire achieved a total gain for its shareholders of $24.1 billion. We used $1.3 billion of that to repurchase our stock, which left us with an increase in net worth of $22.8 billion for the year. The per-share book value of both our Class A and Class B stock increased by 14.4%. Over the last 48 years (that is, since present management took over), book value has grown from $19 to $114,214, a rate of 19.7% compounded annually.

A number of good things happened at Berkshire last year, but let’s first get the bad news out of the way. When the partnership I ran took control of Berkshire in 1965, I could never have dreamed that a year in which we had a gain of $24.1 billion would be subpar, in terms of the comparison we present on the facing page.

But subpar it was. For the ninth time in 48 years, Berkshire’s percentage increase in book value was less than the S&P’s percentage gain (a calculation that includes dividends as well as price appreciation). In eight of those nine years, it should be noted, the S&P had a gain of 15% or more. We do better when the wind is in our face.

To date, we’ve never had a five-year period of underperformance, having managed 43 times to surpass the S&P over such a stretch...But the S&P has now had gains in each of the last four years, outpacing us over that period. If the market continues to advance in 2013, our streak of five year wins will end."

"Now to some good news from 2012: Last year I told you that BNSF, Iscar, Lubrizol, Marmon Group and MidAmerican Energy--our five most profitable non-insurance companies--were likely to earn more than $10 billion pre-tax in 2012. They delivered. Despite tepid U.S. growth and weakening economies throughout much of the world, our 'powerhouse five' had aggregate earnings of $10.1 billion, about $600 million more than in 2011...Unless the U.S. economy tanks-- which we don’t expect--our powerhouse five should again deliver higher earnings in 2013. The five outstanding CEOs who run them will see to that.

Though I failed to land a major acquisition in 2012, the managers of our subsidiaries did far better. We had a record year for 'bolt-on' purchases, spending about $2.3 billion for 26 companies that were melded into our existing businesses. These transactions were completed without Berkshire issuing any shares...We will keep our foot to the floor and will almost certainly set still another record for capital expenditures in 2013. Opportunities abound in America."

 


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