Warren Buffett’s 1981 Letter to Berkshire Shareholders – Animated
[munger]
Published on Jul 13, 2016
00:00 – How Berkshire is doing
00:40 – Interest rates, valuations, P/Es
02:47 – Relationship between market value and business value
03:21 – Acquisitions
05:31 – The earnings iceberg
Choice quotes:
“While market values track business values quite well
over long periods, in any given year the relationship can gyrate
capriciously. Market recognition of retained earnings also will
be unevenly realized among companies. It will be disappointingly
low or negative in cases where earnings are employed non-
productively, and far greater than dollar-for-dollar of retained
earnings in cases of companies that achieve high returns with
their augmented capital.”
“Why else should the shareholders of Company A(cquisitor) want to own an interest in T at the 2X takeover cost rather than at the X market price they would pay if they made direct purchases on their own?”
” Such favored business must have two characteristics: (1) an ability to increase prices rather easily (even when product demand is flat
and capacity is not fully utilized) without fear of significant
loss of either market share or unit volume, and (2) an ability to
accommodate large dollar volume increases in business (often
produced more by inflation than by real growth) with only minor
additional investment of capital”
I can never do the full letter justice. Read it here.
http://www.berkshirehathaway.com/lett…
