Warren Buffett’s 2017 Letter to Shareholders

Berkshire Hathaway’s gain in net worth in 2016 was $27.5 billion, increasing the per-share value of Class A and Class B stock, which was worth 10.7%. Berkshire’s net worth has to reflect what really counts, and this is the intrinsic value of the business. Warren Buffett expects that Berkshire has normalized the ability to earn power per share to increase every year. He reminds shareholders that it is a mutual job to deliver significant growth because Berkshire directors want to keep all the earnings. Buffett is honest about the one error he made, despite being cautious. Dexter Shoe was bought for $434 million in 1993 although the value went to 0.

Buffett used stock for the purchase, leading to giving the sellers 25,203 shares of Berkshire, which at the end of 2016 became worth more than $6 billion. The letter also has tables showing the Berkshire financial record. The United States is said to have a wealth of $90 trillion. Buffett believes that many companies will fall behind and some will outright fail. The widespread fear of an event is supposed to be the “friend” of investors who may find bargains this way, but personal fear is also your enemy because it will be unnecessary.

Berkshire states they are operating at the underwriting profit for 14 consecutive years, pre-tax gain totaling $28 billion. Berkshire is more conservative avoiding risk than other, larger insurers. An example of long-term success by someone working at a company owned by Berkshire is GEICO CEO Tony Nicely, who joined GEICO at 18 and has worked 55 years at the same company. GEICO has historically held a cost advantage to other companies and had intense growth in 2016. Also, Berkshire Hathaway owns Berkshire Hathaway Energy, at least 90% of it, as they have their own section of the 2017 letter to shareholders.

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