Today is the first day of the first lunar month in 2022, here to give you a new year. I wish you all good health, good luck and good fortune in the New Year.
In 2016, Buffett was 86 years old.
Digression
There's nothing wrong with following your own values.
There is no KPI assessment for investment, and no one asks us to buy all the bull stocks.
——Originated from the Tang Dynasty Tang Dynasty Tang Dynasty Study Room", "Study Collection No. 37", October 16, 2021
2016 Learning Excerpt (3)
1) We have not made any kind of commitment to Berkshire Hathaway to hold these stocks forever and not to trade freely in the market.
2, let's not be misled by others. Doesn't it say that Buffett said long-term holding, we bought it buy in hold long-term holding, how dude you also trade frequently, doesn't it mean that you buy it and keep holding it?
3, events are easy, that is, time has changed, the situation has changed, the environment has changed, the historical stage has changed, and anything can happen.
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Buffett then talked about the other three plates as usual.
Insurance is followed by regulated, capital-intensive utilities.
There are two major companies in this sector, one called BNSF and a railway company. The other is that the energy company is called Berkshire Hathaway Energy, this energy company used to be called Sino-American Energy, and changed its name to BHE a few years ago, both of which are doing well, and many things are basically repeated in the past.
He mentioned that Berkshire Hathaway Energy, whether it is an energy company or BNSF Railroad Company, has become a leader in environmentally friendly technology companies, such as wind energy, which is not polluting, facilitates contribution to society, and provides efficiency for society as a whole. In short, this sector is very stable and worth investing in.
He specifically mentioned that there is a home service under this energy company, that is, a home service company, which is a real estate agency. The real estate intermediary company was originally a subsidiary acquisition company under Sino-US Energy, and as a result, this housing intermediary company developed a bit like China's company, which may be a chain home, and it is also ahead anyway.
The brokerage intermediary has more than 240,000 brokers and a total trading volume of $86.5 billion in the past year, which is not too small a company.
The next major section is the familiar things from lollipops to airplanes, from happy candies and chocolates to books, to carpets, packed together. This sector is called manufacturing services retail.
He said the consolidated statement included 44 companies, reporting directly to Berkshire's headquarters in Omaha, but each of the 44 companies had a significant number of groups. Take, for example, Marmond. Marmon has its own 175 separate business segments, group within the group, and then he said Berkshire Hathaway Motor Company has 83 dealers across the country, covering nine states.
He said that so many companies, 44 companies combined together look like a big platter, a smorgasbord, a miscellaneous army. But in fact, if you combine them and measure them in the form of ROE, a lot of companies are very good, and some even have a 100% return on net assets. I don't know who he mentioned, he didn't say, there are a lot of companies with ROEs between 12% and 20%, which of course is very good, but there are a few major mistakes, which are mentioned earlier, such as Dexter Shoes is zero at all.
In short, Buffett said that this sector as a whole business package, it seems to be good.
In the next paragraph, Buffett discusses the issue of accounting policy, this one is very boring, and the second one is far away from us, so I will not say it.
One of the four major sectors of this last sector is the financial and financial products sector, which has three companies, and many of these words are repeated. It's the same as last year.
Of the three companies, one is a furniture rental CORT and the other is responsible for semi-trailer rental. Then there are some Marmont companies responsible for a variety of vehicles, trucks, crane trucks, tanker trucks.
He said all three companies are leading companies in their respective fields.
He said the most important thing in this sector is claydon house company that we mentioned earlier. Everyone also knows that the reason why Claydon House is called a housing company, and then including the trailer rental car rental company just mentioned, is that it is placed in the financial sector because they are selling their products.
For example, Clayden, who originally made those prefabricated houses, then made the houses prefabricated panels to build. Then you buy it and build it, just find a vacant lot to build up. And then the same is true of the trailer truck, the tanker truck.
It is either prefabricated, or leased to you, or others can't afford it. Others say that after this house is done, it will get 60,000 US dollars, and ordinary people can't afford to buy it, so can it be paid in installments to you?
Let's say you give you a thousand dollars a month, then sign for ten years and two years, then slowly this company, he goes from a manufacturer manufacturing company, he becomes a financial company. You see more and more loans, and you may not be incompatible with this company, so you become a financial company.
That is to say, there is cash flow in every month, and it is also very cost-effective after the cash flow comes in. So this Clayden house reached a loan of more than 10 billion US dollars last year. It is also nearly 100 billion yuan, and it is not a small company. And then you know that the whole thing they did well was because they had the support of Berkshire's big shareholders with strong financial resources.
So when their peers can't do it, they do better. It is such a background, the details will not be said, because there are many repetitive words.
He specifically mentioned that Marmont's rail leasing business has experienced a large recession. So the profits that lead to this sector as a whole may decline in 17 years, and are expected to come in the coming year.
He said, for example, the occupancy rate of his vehicles was 91% in 2016 and 97% in the same period last year.
Buffett seems to have fallen from 97% to 91%, which is already relatively large, in short, this plate is also such a situation, and the four major plates have probably talked about it.
The best thing, Buffett values most is the insurance sector. Because the insurance sector brings nearly $100 billion in float, which can be used by Buffett for investment.
In other sectors, some companies in the early days slowly accounted for a smaller and smaller proportion of the whole, and they were not mentioned separately.
For example, mrs. B's family is still functioning at NGM Furniture World. The Candy is also running, and so is the Buffalo News. But the proportion of plates in the whole of Berkshire has shrunk dramatically. Because his total plate is expanding.
The following section is devoted to the investments.
He said we listed the top fifteen common stock holdings. It is the historically known buying Coca-Cola, buying American Express, buying this apple, and apples began to appear. Apple began to appear in 2016, and Apple began to appear in its 2016 letter to shareholders, holding 1.1% of Apple's shares, at a cost of $6.7 billion, with a market capitalization of less than $7.1 billion, which was almost flat. That's when you first get started.
Everyone now knows that Apple, Apple stock to the latest year, in one stock to make more money than all the other sum, this is a very shocking, earth-shattering thing. So far, Coca-Cola is still relatively large.
Others like IBM are still there, and IBM basically shows that it doesn't make much money on this. For example, by this time in 16 years, Buffett still held 8.5% of IBM's shares, probably one of the largest shareholders, the cost was $13.8 billion, the market value was $13.4 billion, less than $13.5 billion, basically flat, slightly at a loss.
That other thing is actually Moody's, Moody's is the rating company, Moody's is earning, Moody's is making nearly ten times. The cost of holding shares on this account was less than 250 million, and now it has become 2.3 billion.
Other familiar Wells Fargo banks are still there, in short, these are some familiar, and some new faces have emerged.
Then in this investment form, he specifically mentions two of his capable players, Ted and Todd, who now have more than 10 billion in management. That adds up to more than two billion.
When it was mentioned a few years ago, it was to give them each $1 billion in tubes, and these years have done a good job, and they have more and more money in charge, which has been 20 billion.
He said the money was pension assets for various of Berkshire's subsidiaries.
He said that a lot of the companies berkshire invests in, a lot of them are also buying back shares, and some companies are buying back a staggering amount of shares, a relatively large number, including IBM, which Buffett said we like very much.
Because we think about it, in most cases, companies buy back shares because their share prices are undervalued in the market. In this way, he buys it back to increase the intrinsic value of our survival, that is, the shareholders who stay. When the scale of a company's operation continues to expand and the outstanding shares continue to decline, the shareholders who continue to survive are very beneficial.
So whether Buffett is himself or a company, he explains.
He said that some media and some shareholders have made various discussions, remarks and reports. Intentional or unintentional implications are that Berkshire Hathaway will forever hold some stock assets, which is the permanent holding.
And we've often been looking at it more than twenty years ago, saying that Buffett listed three stocks as permanent holdings, but Buffy specifically clarified it here.
He said we were holding some stocks, and as long as I was healthy and I was alive and healthy, I wasn't prepared to sell those stocks. Indeed it is.
But we didn't make a commitment in any form. Promised Berkshire Hathaway to hold the stocks forever and not to trade freely in the market. We didn't say that. We behave like this, and I probably wouldn't sell it if I'm healthy, because people list three companies like him as his permanent holdings, like The Washington Post, Coca-Cola, and Wells Fargo.
Now another four or five years have passed, and the truth is that then Wells Fargo began to sell, and he is a major shareholder.
He said we had made no commitment in any form. So Berkshire Hathaway believes that any securities asset that can be freely traded in the market is likely to be sold. Although it seems unlikely that the company will do this at present, this statement is very rigorous, so I will specifically bring this out to say it.
So don't be misled by others. Doesn't it say that Buffett said long-term holding, we bought it buy in hold long-term holding, how buddy also frequently traded, didn't you say you bought?
The matter of events is that time has changed, circumstances have changed, the environment has changed, the historical stage has changed, and anything can happen.
Buffett specifically talks about stock dividends and taxes in the following paragraph.
He said before ending this chapter. I would like to say a few words about stock dividends and taxes.
He said Berkshire, like most companies, retains profits to create more value. So which is the dividend for a dollar stock and the retention of a dollar in capital gains? We choose the best, so Buffett explained the reason why we have not paid dividends for so many years, and once the dividend is deducted, one more tax will be deducted.
Because everyone knows, everyone knows that if you buy stocks now, the stocks you buy, whether it is Gree or Maotai, or not to mention what H shares, distribute the money to you. You buy stocks within a year to deduct 15% or 20% of this tax, holding shares above a year to have a discount, this half a year a grade, a grade a year, so the United States is the same, distributed to your red, you have to file taxes, this is not a very cost-effective thing.
So Buffett bought back from the front, he talked about his own dividend, and also mentioned the issue of one dollar. So this was distilled by Hagerstron on the one-dollar principle.
This paragraph is the end of all the business sectors, and the last one is left below. But one of the more important sections is that Buffett has spent some chapters talking about the famous ten-year gambling contract in history.
The end result of the ten-year bet is that Buffett wins, but someone else will have to give him another 10 years. That means he's not convinced, and Buffett considers that he was 87 years old at the time, because he was due in 2017, that is, from 2008 to 2017.
Then Buffett later considered that he was older and did not agree.