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					Highlights Buffett shareholder letter
1, except in special circumstances (such as debt ratio is particularly high or the
account on hold significant assets were not revalued), or we believe that
"return on equity" should be more reasonable measure of
management performance indicators. (1977)
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2, the insurance industry, though small mistakes that constantly get good, but roughly
match the results, in some ways, this situation is exactly opposite to the textile
industry, management class which is excellent, but they only get a little of the profits
Members of the management a lesson learned, unfortunately, is learned again and
again, choose the wind rather than the wind industry, the importance of the
environment. (1977)
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3, we have invested in stock options to buy the whole way the patterns are similar
companies, we want the company must be (1) We can understand 行业 (2) has
Changqi competitive force (3) from both the virtuous business persons (4) at attractive
prices, we never try to buy some of the anticipated short-term stock price performance
of stocks, in fact, if the performance of its business in line with our expectations, we
do hope that their stock will not be too high, so we have the opportunity to better price
to buy more shares. (1977)
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4, our past experience shows that ownership of a good part of the price of the
company, often talks on the agreement to buy the whole family than to be much
cheaper, and therefore want to have cheap and good business ownership, direct
acquisition will often not available , might as well have a stake through indirect
means to achieve his aim. (1977)
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5, control though so we have opportunities, but also carry responsibilities to manage
business operations and resources, we have no capacity to provide the existing
management of these Ewai any help, in fact, rather than control is not as Buguan ,
better get good results, this idea may be very unusual, but we believe more
appropriate. (1977)
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6, I do not think including myself, including itself, to the
"success" to predict short-term fluctuations in the stock market.
(1978)
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7, our policy is to concentrate holdings. When we decided to buy after "a
large," not this also bought that also bought a little bit, but afterwards it
indifferent. (1978)
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8, we can accept the allocation of investment rather than retained earnings, provided
that the company must use the "better" purposes, or should be
distributed to shareholders or used to repurchase shares of the company. (1978)
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9, according to our past experience shows that a high cost structure of the
company's operators, always find reasons for increase in corporate
expenses; and relative, a low-cost structure of the company's operators,
always find ways to save the company costs, even if already much lower than the cost
of the latter the former. (1978)
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10, in the short term, we have always thought that operating profit (excluding
investment income) divided by net assets income ratio is a measure of operating
results of a year the best way. The long term, we believe that net income (including
realized and unrealized capital gains and extraordinary gains and losses) divided by
net assets (at fair market value of all investments) from the ratio, a measure of
long-term operating results, the best way. (1979)
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11, we judge a company's good or bad, depends on its return on net assets
(excluding financial leverage or improper accounting to prepare accounts), rather than
earnings per share growth or not, because even if the money in the bank fixed-fixed,
also achieve the same purpose as the latter. (1979)
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12, in some industries, such as local television, as long as a few of the tangible assets
can make a huge surplus, and this line is also of a high asset prices, what can book a
dollar to ten dollars outcry, This reflects the social status of its amazing profitability,
although the price a little scary, but rather as the industry may be better ways to go.
(1979)
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13, the so-called "turnaround" company, the last few successful
cases, with the time and energy spent on purchase of cheap bad company, not as a fair
price to invest in companies of poor quality. (1979)
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14, the competitive nature of M & M often makes the whole company to
obtain the actual price is higher than the actual value of enterprises, and the nature of
the stock market auction often allows us to obtain a relatively low cost share of a
company. (1980)
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15, when a brilliant business sectors experienced a gradual decline experienced a
sunset industry, often the latter prevailed. (1980)
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16, unlike most companies, Berkshire, and will not for some specific short-term
capital financing needs away, but we borrow is that in a period of time (roughly less
than the financing period) will have many good investment opportunities arise. Most
of the best investment opportunities in the most money in the market tight, at which
point you will want to have a huge Hou firepower. (1980)
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17, for the acquisition of objects, we prefer those "cash" instead
of "digest of cash" company. As the impact of high inflation,
more and more companies are finding they must be re-earned every dollar invested to
maintain the productivity of its original, even if the book value of these companies
and then look good, unless that held the cash, We shall remain on high alert. (1980)
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18, we prefer to buy a better unit price X 10% stake in the company, rather than 2X
the unit price of this good company to buy 100% of the shares. But most
managements prefer the latter, they make more use of "scale"
rather than "profit" as a measure of their own or someone
else's standards. (1981)
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29, in particular, the company can adapt to inflation, usually they have two
characteristics: first, easier to raise prices (even when the demand for flat products
and production capacity are not fully utilized the same) and are not afraid of losing
market share or sales volume; Second, as long as the additional small amount of
capital expenditure, they can make a substantial increase in turnover (although the
reason for the increase largely because of inflation rather than the actual increase in
output of the reason). (1981)
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20, we have a majority equity investment practice only when we can buy at
reasonable prices attractive enterprise to work, but also need to be gentle with the
stock market, as the market is like God to help those who help themselves people, but
God is not the same place he will not forgive those who do not know what they are
doing people. (1982)
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21, in general, if the companies are in industries facing oversupply and the
commercialization of a product generally the case (in the overall performance,
appearance, and so no service differentiation), they will most likely profit warning, of
course, If the price or cost in some cases (for example, intervention by government
legislation, illegal collusion or international cartels such as OPEC) can be controlled
or slightly to remove free market competition. Otherwise, if the customers do not care
about it who use the products or services provided, costs and prices from perfect
competition to decide, so, Chan Ye ironclad face a tragic end, which is why
Suoyouchangshang Ben Shen Jie Nulijiangtiao products or services and the
establishment of the difference , this approach helpful in the candy (the consumer will
specify the brand) but did not use sugar (not you heard someone say: "My
coffee to add cream and a certain brand of sugar"), in many industries is
not achieve differentiation, some producers can cost advantage due to the outstanding
performance, however in the definition, which is a rare or even non-existent, so most
of the sales have been fully commercialized companies, will be the inevitable
outcome is continuing overcapacity can not control the price drop led to poor earnings,
of course, because of overcapacity, capacity reduction or increase in demand for
self-break, but unfortunately this amendment process is slow and painful, when the
industry finally When faced with a rebound, but is beginning to swarm full expansion,
less than the previous few years must also face the predicament. The final decision on
long-term industry profitability is the tight supply and the annual rate of excess supply,
this ratio is usually very small (in our experience in the textile industry, the tight
supply situation goes back many years ago, and about not only to maintain a morning
time). In certain industries, the supply situation is tight to maintain the previous
period, and sometimes even more than the actual demand growth had expected, and to
increase productivity due to the complexity involved in the planning and factories and
require considerable lead time. (1982)
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22, Nu Li repurchase its own shares in the company, there are two advantages: First,
obviously, is a simple supplementary about figures, Touguo buy back company shares
is like it takes one dollar of the cost of Pian Nenggouhuode two Kuaiqian of Jia Zhi
Therefore, the intrinsic value per share can be greatly improved, other than spend big
money to the acquisition of the company's results are much better. Second,
less obvious, and no one knows, in fact, very difficult to measure, but the effect
became more apparent over time, that is, management can repurchase its own shares
to the external declaration of its emphasis on shareholder interests heart rather than
taking the expansion of the territory of running a business person, as the latter are
often not only not help shareholders, but even harmful to the interests of shareholders.
Thus, the original shareholders and interested investors will be more confidence in the
company's prospects, but stock price reaction will be up closer to its own
value. (1984)
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23, in the business world, a strong advantage of the newspaper is extremely obvious,
employers generally believe that only hard to deliver the best products to maintain
high profits, but this theory Querang compelling facts can not be convincing break,
when the first-class newspaper to maintain high profits, the third-rate newspaper of
the money earned is not less but sometimes more, as long as you are strong enough in
the local newspaper. (1984)
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24, Bill Rose described the over-diversification of the trouble, if you have 40 wives,
you must have no way to thorough understanding of each woman, over time, we focus
on ownership of the policy will eventually show its advantages. (1984)
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25, many of the surface, continuing good performance of the company paid out in fact
the majority of funds devoted to the cause of non-competitive over. Live cover only
the former the latter appalling (usually with a high acquisition mediocre enterprises)
the failure of the business class has also repeatedly emphasized that they used to
defeat the lessons learned, but once failed to find the next opportunity. (1984)
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26, the choice of stocks, we focus on how to buy beautiful, while taking no account of
the possibility of the sale. (1985)
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27, experience has shown, can create new high profit business, and now the way
business is usually five years ago or even ten years ago, with little difference in a
company if the order is changed, but may increase the opportunity for mistakes, say
more More to the point, in a troubled land, is not likely to build an impregnable castle,
which has stable characteristics such enterprises is the key to continuing to create high
profit. (1987)
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28, previously referred to "Fortune" magazine's
research, we can fully support my argument, in 1977 to 1986, a total of 1,000, only 25
consecutive years to achieve an average return on equity of 20% of the standard, and
no year and less than 15% of the double standard, which is also a high-quality
companies on the stock market darling, in all there are 24 of 25 outperformed the S
& P500 index. Star of this wealth could make you an eye-opener, the first
payment of interest relative to their ability, they have very limited use of financial
leverage, a really good company does not need to borrow money, the second addition
to a so-called high technology companies, other than a few belong to the
pharmaceutical industry, most companies industry was already fairly mundane, most
of the products or services are sold a decade ago, roughly the same (although the
number of Huoshi price, or both , much higher than before), the company's
records show the status of full use of existing industries, or focus on a single brand
leadership is often the only way to create corporate profits. (1987)
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29, Charlie and I focus on the operating results of the portfolio itself, in order to
determine whether an investment success, not their price changes every day or every
year, as Graham said: "In the short term, stock market is a voting machine,
but in the long run, it is a weighing device. "a successful company is not
found quickly focus on the important thing is as long as the company's
intrinsic value to ensure a steady pace growth is the key, in fact, sometimes the
benefits of the later was found more, because we have more opportunities to lower the
price of its shares to buy. (1987)
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30, most of the company's managers, not good at doing the allocation of
funds, the reason for this is not surprising, because most of the boss's
success is relying on their marketing, production, engineering, administration
expertise. Once a CEO, they immediately have to face many new responsibilities and
challenges, including the allocation of funds to do the decision-making, which they
had never faced a difficult and important task. If a company to retain 10% of annual
earnings in the company if, decades later, he is equal to the funds charge a 60%
increase. (1987)
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31, 在 finite world where any high-Cheng Zhang of things will eventually
self-destruction, if the Jichuxiangdui smaller Cheng Zhang, Ze Hui occasionally the
law of the temporary Dapo, but Dang basic Peng Zhang to a certain degree, good play
will Jieshu High growth will one day be bound by their own. (1989)
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32 After 25 years of business management and operation of a variety of career years
later, Charlie and I had not learned how to solve the problem, but we learn how to
avoid them back at this point we are down very successfully, we Aspects of
Intellectual Property that a foot of the low hurdles, high jump, while avoiding crash
Qi Chi. We try to be evasive demon dragon, not to take to the Dragon. (1989)
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33, rational manner under the influence of norms in the system will slowly degenerate.
For example, (1) as if Newton's first law of motion is subject to the
standards organization will resist any direction on any changes to the existing (2) as
has the work will be to fill all the time, businesses plans or acquisitions always have
enough reason to run out of funds (3) Any organization a cult leader, no matter how
extreme, you can always find his followers to support his theory of investment
evaluation reports (4), the industry move, whether to do the expansion, acquisition or
other treatment setting manager will unintentionally imitate each other. The
organization of dynamic and not corrupt or stupid, mislead them onto the road. (1989)
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34, denied the long term, investment decisions should be based on performance or
stock price performance over, but the price will depend on future profitability, as
investment is like baseball, you want to score you need to focus concentrated to the
ground, rather than staring scoreboard. (1991)
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35, the parent company is not simply because of price factors will own its best to sell
a subsidiary, the company president, will ask, why should I change the crown jewels
to sell? But when the scene switched to its own portfolio, but he would not hesitate,
even from companies desperate to change to another company, but relies on a few
superficial words stockbroker, one of the most Black's sentence comes as
"you will not benefit the bankruptcy." Can you imagine a
company would use similar words, President Board of Directors will recommend the
most potential to sell a subsidiary to it? In my view the principles applicable to
business also apply to stock investment, investors in the company's shares
are held by a show of toughness, it should be held with the owner of a company, like
all of the Company's equity. (1993)
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36, investors must bear in mind that your investment performance is not like the way
the Olympic diving competition scores, degree of difficulty level is not important that
you properly invest in a straightforward and sustained competitiveness of companies
that the returns, and you work hard and Analysis of a continuously variable, complex
and convoluted is comparable companies. (1994)
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37, no control of the goods in a standardized industry, a company lower costs than
competitive, is forced to close down. (1994)
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38, the retail business very difficult, in my investment career, I've seen
many retailers who have a high growth rate and return on equity, but at the end,
suddenly show a sudden downturn in many or even forced to to close down end,
compared to general manufacturing and service industries, such glimpses of eternity
in the retail frequent part of the reason is that these retailers must always be alert to
keep smart, because your competitors, ready to copy your practice , and then beyond
you, while consumers will not scrimp on the industry to new entrants the opportunity
to try, but the results in a decline in retail trade, destined will fail. Phase must always
be alert for this industry, there is a moment I call it as long as the smart industries, for
example, if you know how long ago the wisdom to buy a local TV station, you can
even give it to lazy poor relatives to manage, but this cause is still properly operate a
few decades, of course, if you know Tom Murphy will be placed in the correct
location on top of what you get will be even more amazing, But on the retail industry,
if the people in the wrong words, it means ready to close down bought a ticket. (1995)
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39, the profitability of any company depends on (1) return on assets (2) the cost of
debt (3) the use of financial leverage (that is, its use of debt rather than equity to cope
assets to obtain the degree). (1995)
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40, if properly implemented, the use of such investment strategies to investors will
find a small number of holdings in some companies will account for a large part of his
portfolio, in such a way as if a person bought a hypothetical cohort of great potential
College star basketball player a 20% interest in the future, including a small part of
the players into the NBA hall may be able to play, then investors will find that their
payment of a premium will be the majority of their income, if someone the interests of
the proposed transfer of this part of the swap is akin to Michael Jordan to the Bulls
sold out to the same team just because he is really too important. (1996)
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41, no matter of buying the whole company or stock investment, you will find that we
prefer companies with little change in industry for the simple reason, we hope to buy
the company can continue to have a competitive advantage for ten or 20 years or more,
rapidly changing industry environment may be people made their fortunes overnight,
but can not provide the stability we want. As an investor, the attitude of the popular
fashion industry as if in space exploration, as we have for this brave act to cheer, but
to play our own, then we'll talk! (1996)
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42, you do not have as many experts as also of many companies, the opposite of you
to do is to select few within the scope of your company is like, the size range of
ability is not important, what matters is that you must be very aware of their capacity.
Investment to be successful, you do not need to study what is Beta value, efficient
markets, modern portfolio theory, option pricing or emerging markets, everyone is
better not to know that a number of theories, of course, I have this view and now with
these courses significantly different from the mainstream of academia, in my view,
students who are interested in investment in two courses as long as the fix - that is,
"how to give a correct evaluation of enterprise" and
"think about their relationship with the market price" can be.
(1996)
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43, if we are able to do that we know that competitive advantage in the context of the
good things as possible, and to understand where the limits possible, and to Yuce
rapidly-changing industry operating companies, their prospects for long-term De
operation, it is clear already exceeded our affordable 之外, anyone claiming to do
similar to the forecast You ability, and to stock performance In support, then I would
not be envious of, and do not want to follow the contrary, we will come back to
adhere to what we know, if the unfortunate off track, it certainly is not careful, not
panic rash want to get a reasonable explanation, better can be sure that Burke Hill will
always have the opportunity to find it been able to do. (1999)
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44, between investment and speculation is always a thin line, especially when all
market participants are immersed in the festive atmosphere which is especially true
when there is no more than big money for doing nothing is even more irrational, in
After the experience of that kind, normally sensible people will, like Cinderella at the
ball as being blinded, they know that many in the party in waiting to - that is to
continue to large sums of money into speculative activities on pumpkins and mice
show his true colors, the higher the probability, but they nevertheless hate to miss any
of this grand ball for a minute, all plan to stay until the last minute to leave, but the
problem is in this dance The clock is simply not a pointer! (2000)
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45, perhaps for the long-term derivatives transactions and the huge expansion of the
large number of unsecured receivables reservations, let us play a little misplaced, but
we believe that financial derivatives are financial weapons of mass destruction, doubt
about the danger, although the potential unknown, but may be absolutely fatal. (2002)
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46, investors must understand the various financial institutions, the rapid growth of
big issues often hidden, sometimes even more significant fraud in order to really test
the profitability of derivatives business must be in a state of no growth, only so at low
tide and we have to know who is swimming naked. (2004)
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47, a truly great company must have a strong and lasting "moat"
to protect its high return on investment. But capitalism's
"dynamic" decision of the competitors will continue to attack
those high-return business "castle." Therefore, an
insurmountable barrier, such as a low-cost providers, such as car insurance cover can
be (GEICO), Costco stores (COSTCO), or who have like Coca-Cola, Gillette,
American Express such a powerful world-renowned brands, Enterprise is fundamental
to sustainable success. Business history is full of "Rome Roman
Candle" (Roman Candle) as dazzling brilliance of companies, their
so-called "long Goushen cutting" turned out to be only an
illusion, across the soon to be rivals. (2007)
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48, we are "continuing" the evaluation criteria for us to rule out
a number of changes in the development of rapid and continued industry companies.
While capitalism's "creative destruction" is very
beneficial for social development, but it excludes investment certainty. A need to
constantly repeat the excavation of the moat, and finally simply mean that there is no
moat. (2007)
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49, however, if a business depends on one superstar to generate good results, that the
business itself is not considered good business. One in your area under the leadership
of chief brain surgeon's medical partner, may have a pleasing substantial
and growing profits, but for its future does not mean anything. With the departure of
the surgeon, partner of "barrier" has also disappeared. (2007)
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50, we are looking for business, is in a stable industry with long-term competitive
advantage. If the entire economic environment driven boom in the industry, which of
course good, but even without the structural growth of the economy, so business is
still worth having. We need to do is sit back and enjoy these benefits with the business
of mergers and acquisitions can be similar elsewhere. As a rule does not require you
to be their money back to where you get the money. In fact, this is often wrong: truly
great business, not only from physical assets to get huge gains, but in any continuous
period, do not have to put a large part of income Neibu reinvestment to maintain their
original The high rate of return. Growing business, both because of the rise in sales
requires more working capital, will need more investment in fixed assets. A company
to meet its growing demand for capital is a substantial increase, just to prove whether
it can be a satisfactory investment. Do not have a large capital investment, the
business can be a big moneymaker, this is really great! Do not believe, you have to
ask Microsoft or Google. Therefore, the size of output from the profits, we can only
measure of whether a company is good, but can not determine whether the superior.
(2007)
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51, at any time, we are not Tongguo the market price of investment goods to calculate
our investment progress. We prefer to use two companies for testing in our own
standards to measure their achievements. The first criterion, net of expected growth in
the industry after the actual earnings growth; second, more subjective and more, is to
see their "moat" Is this the year to become wider,
"moat" is a metaphor, referring to the The company has, and
will be sad the day it's competitors a competitive advantage. (2007)
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52, first of all, all investors will inevitably earn: an average return on investment, net
of transaction costs; Secondly, the passive investors and index investors, because their
transactions from start to finish is very active, they earn income minus the average
income level of a very low transaction costs; once again, to earn the market average
return in the group, the remaining part of that is - trading active investors, however,
and therefore the group will incur high transaction , management and consulting fees.
Therefore, the trading activity of investors who are not active than their
"fellow countrymen", will erase much of the investment return.
This means that: compared with "in ignorance" (know-nothing)
to passive investors will win. (2007)

				
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