1990 Shareholder Letter

Date: March 1, 1991 Author: Warren Buffett Company: Berkshire Hathaway

Overview

1990 net worth increased $362 million or 7.3% (S&P fell 3.1%), with per-share book value reaching $4,612.06 — a 23.2% compound annual return over 26 years. This letter discussed the "Big Four" permanent holdings and Buffett's temporary role at Salomon.

Key Points

The Big Four Permanent Holdings

"Last year I told you that though these companies — Capital Cities/ABC, Coca-Cola, GEICO, and Washington Post — had fine businesses and superb managements, widespread recognition of these attributes had pushed the stock prices of the four to lofty levels."

The two media companies (Capital Cities/ABC and Washington Post) fell significantly due to industry changes, while Coca-Cola stock rose. Overall, yearend 1990 prices were "far from enticing, but a bit more appealing than they were a year earlier."

Salomon Interlude

Buffett took the role of Interim Chairman of Salomon Inc in August 1989 after the Treasury fraud scandal. He described it as "put my mouth where our money was" — managing a crisis rather than making an investment.

Capital Base Reality

"Berkshire's equity capital — which now totals $5.3 billion — makes it certain that we cannot maintain our past rate of gain."

For 15% annual growth going forward, Berkshire would need "profits aggregating about $5.3 billion" over the decade.

Media Industry Concerns

The letter began addressing the secular changes in media economics, where advertising-supported businesses faced structural challenges from cable fragmentation and retail changes.

Famous Quotes

"The market is a voting machine — reflecting a voter-registration test that requires only money, not intelligence or emotional stability — but in the long-run, the market is a weighing machine." — Ben Graham (quoted)

Related

• letter-1989 — Previous year
• letter-1991 — Following year
• warren-buffett
• compounding