巴菲特致股东的信1997.docx

巴菲特致股东的信19971997Chairman'sLetterTotheShareholdersofBerkshireHathawaylnc.:1.AllfiguresusedinthisreportapplytoBerkshire'sAshares,thesuccessortotheonlystockthatthecompanyhadoutstandingbefore1996.TheBshareshaveaneconomicinterestequalto130ththatoftheA.Givenourgainof34.1%,itistemptingtodeclarevictoryandmoveon.Butlastyear'sperformancewasnogreattriumph:Anyinvestorcanchalkuplargereturnswhenstockssoar,astheydidin1997.Inabullmarket,onemustavoidtheerrorofthepreeningduckthatquacksboastfullyafteratorrentialrainstorm,thinkingthatitspaddlingskillshavecausedittoriseintheworld.Aright-thinkingduckwouldinsteadcompareitspositionafterthedownpourtothatoftheotherducksonthepond.Sowhat'sourduckratingfor1997?Thetableonthefacingpageshowsthatthoughwepaddledfuriouslylastyear,passiveducksthatsimplyinvestedintheS&PIndexrosealmostasfastaswedid.Ourappraisalof1997'sperformance,then:Quack.Whenthemarketbooms,wetendtosufferincomparisonwiththeS&PIndex.TheIndexbearsnotaxcosts,nordomutualfunds,sincetheypassthroughalltaxliabilitiestotheirowners.Lastyear,ontheotherhand,Berkshirepaidoraccrued$4.2billionforfederalincometax,orabout18%ofourbeginningnetworth.BerkshireW川alwayshavecorporatetaxestopay,whichmeansitneedstoovercometheirdraginordertojustifyitsexistence.Obviously,CharlieMunger,Berkshire'sViceChairmanandmypartner,andIwon,tbeabletolickthathandicapeveryyear.ButweexpectovertimetomaintainamodestadvantageovertheIndex,andthatistheyardstickagainstwhichyoushouldmeasureus.WewillnotaskyoutoadoptthephilosophyoftheChicagoCubsfanwhoreactedtoastringoflacklusterseasonsbysaying,"Whygetupset?Everyonehasabadcenturynowandthen.',Gainsinbookvalueare,ofcourse,notthebottomlineatBerkshire.Whattrulycountsaregainsinper-shareintrinsicbusinessvalue.Ordinarily,though,thetwomeasurestendtomoveroughlyintandem,andin1997thatwasthecase:Ledbyablow-outperformanceatGEICO,Berkshire'sintrinsicvalue(whichfarexceedsbookvalue)grewatnearlythesamepaceasbookvalue.Formoreexplanationoftheterm,intrinsicvalue,youmaywishtorefertoourOwner'sManual,reprintedonpages62to71.Thismanualsetsforthourowner-relatedbusinessprinciples,informationthatisimportanttoallofBerkshire'sshareholders.Inourlasttwoannualreports,wefurnishedyouatablethatCharlieandIbelieveiscentraltoestimatingBerkshire'sintrinsicvalue.Intheupdatedversionofthattable,whichfollows,wetraceourtwokeycomponentsofvalue.Thefirstcolumnlistsourper-shareownershipofinvestments(includingcashandequivalents)andthesecondcolumnshowsourper-shareearningsfromBerkshire'soperatingbusinessesbeforetaxesandpurchase-accountingadjustments(discussedonpages69and70),butafterallinterestandcorporateexpenses.Thesecondcolumnexcludesalldividends,interestandcapitalgainsthatwerealizedfromtheinvestmentspresentedinthefirstcolumn.Ineffect,thecolumnsshowwhatBerkshirewouldlooklikewereitsplitintotwoparts,withoneentityholdingourinvestmentsandtheotheroperatingallofourbusinessesandbearingallcorporatecosts.Pre-taxEarningsPerShareYearInvestmentsPerShareExcludingAllIncomefromInvestments1967$41$1.09197737212.4419873,910108.14199738,043717.82Punditswhoignorewhatour38,000employeescontributetothecompany,andinsteadsimplyviewBerkshireasadefactoinvestmentcompany,shouldstudythefiguresinthesecondcolumn.Wemadeourfirstbusinessacquisitionin1967,andsincethenourpre-taxoperatingearningshavegrownfrom$1millionto$888million.Furthermore,asnoted,inthisexercisewehaveassignedallofBerkshire'scorporateexpenses-overheadof$6.6million,interestof$66.9millionandshareholdercontributionsof$15.4million-toourbusinessoperations,eventhoughaportionofthesecouldjustaswellhavebeenassignedtotheinvestmentside.Herearethegrowthratesofthetwosegmentsbydecade:Pre-taxEarningsPerShareInvestmentsExcludingAllIncomefromDeCadeEndinqPerShareInvestments197724.6%27.6%198726.5%24.1%199725.5%20.8%AnnualGrowthRate,1967-199725.6%24.2%During1997,bothpartsofourbusinessgrewatasatisfactoryrate,withinvestmentsincreasingby$9,543pershare,or33.5%,andoperatingearningsgrowingby$296.43pershare,or70.3%.Oneimportantcaveat:Becausewewereluckyinoursuper-catinsurancebusiness(tobediscussedlater)andbecauseGEICO,sunderwritinggainwaswellabovewhatwecanexpectinmostyears,our1997operatingearningsweremuchbetterthanweanticipatedandalsomorethanweexpectfor1998.Ourrateofprogressinbothinvestmentsandoperationsiscertaintofallinthefuture.Foranyonedeployingcapital,nothingrecedeslikesuccess.Myownhistorymakesthepoint:Backin1951,whenIwasattendingBenGraham'sclassatColumbia,anideagivingmea$10,000gainimprovedmyinvestmentperformancefortheyearbyafull100percentagepoints.Today,anideaproducinga$500millionpre-taxprofitforBerkshireaddsonepercentagepointtoourperformance.It'snowonderthatmyannualresultsinthe1950swerebetterbynearlythirtypercentagepointsthanmyannualgainsinanysubsequentdecade.Charlie'sexperiencewassimilar.Weweren,tsmarterthen,justsmaller.Atourpresentsize,anyperformancesuperiorityweachievewillbeminor.Wewillbehelped,however,bythefactthatthebusinessestowhichwehave