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The Berkshire Hathaway 2014 Annual Report

Golden Anniversary Edition

Berkshire Hathaway’s Annual Report for 2014 was released at 8:00am this morning. Exactly 50 years ago today, Warren Buffett and his business partner Charlie Munger took the helm at Berkshire Hathaway, which at the time was a dying texting manufacturer in New England. Today, Berkshire is one of the world’s largest companies (BRK is the 5th largest U.S. company by market cap) with over 340,000 employees. Since 1964, Berkshire’s share price has risen by 21.6% per year; the S&P has returned 9.9% per year.

If you haven’t had a chance to read the report, which in addition to Warren’s usual annual letter as Chairman includes special reflections on the company by both Warren and Charlie, I suggest you do so immediately. All of the annual reports are great reads, but this year’s is especially wonderful. Hit up the link at the bottom of this post to read it now.

This year’s annual report offers the most thorough and comprehensible description of Berkshire’s businesses that I’ve come across to date. As a Golden Anniversary commemoration of 50 years, the narrative really celebrates Berkshire Hathaway as a company.

Yet I also noticed a strong theme running throughout the text: the unique and enduring characteristics of Berkshire Hathaway. Both Warren and Charlie stress the fact that the company’s competitive advantage lies in what Charlie calls the “Berkshire System,” or a set of principles that sets Berkshire apart from nearly every other large company and allows it to be the most efficient allocator of capital. And it is really this, and not the two men holding the pen, that will allow Berkshire to thrive even long after they are gone and the ink has faded.

An outline of what to expect in the report:

  • Chairman’s Letter
    • The Year at Berkshire
    • Intrinsic Value
    • Insurance (Berkshire’s core operations, include National Indemnity, BH Reinsurance Group, General Re, and GEICO)
    • Regulated, Capital Intensive Business (BNSF & Berkshire Hathaway Energy)
    • Manufacturing, Service, and Retailing Operations (“ranging from lollipops to jet airplanes”)
    • Finance and Financial Products (50% of Berkadia, Clayton, CORT, Marmon, and XTRA)
    • Investments (BRK’s “Big Four” are AmEx, Coca-Cola, IBM, and Wells Fargo)
    • The Annual Meeting
  • Berkshire – Past, Present and Future (Warren Buffett)
    • In the Beginning
    • Charlie Straightens Me Out
    • Berkshire Today
    • The Next 50 Years at Berkshire
  • Vice Chairman’s Thoughts – Past and Future (Charlie Munger)
    • Describe the management system and policies that caused a small and unfixably-doomed commodity textile business to morph into the mighty Berkshire that now exists
    • Explain how the management system and policies came into being (“the Berkshire System”)
    • Explain, to some extent, why Berkshire did so well
    • Predict whether abnormally good results would continue if Buffett were soon to depart
    • Consider whether Berkshire’s great results over the last 50 years have implications that may prove useful elsewhere
  • The Berkshire Hathaway 1964 Annual Report

The report is sure to delight veteran Buffett fans and new converts alike. So quit dawdling. You only have a year until the next one.

2014 Annual Report | Berkshire Hathaway 2014 Annual Report