1994 Shareholder Letter

Date: March 7, 1995 Author: Warren Buffett Company: Berkshire Hathaway

Overview

1994 net worth increased $1.45 billion or 13.9% (S&P 1.3%), with per-share book value reaching $10,083 — a 23% compound annual return over 30 years.

Key Points

The Fat Wallet Problem

"A fat wallet is the enemy of superior investment results. And Berkshire now has a net worth of $11.9 billion compared to about $22 million when Charlie and I began."

Buffett introduced a $100 million minimum investment threshold: "We now consider a security for purchase only if we believe we can deploy at least $100 million in it."

Ted Williams Analogy

"My argument is, to be a good hitter, you've got to get a good ball to hit. It's the first rule in the book. If I have to bite at stuff that is out of my happy zone, I'm not a .344 hitter. I might only be a .250 hitter."

Buffett will wait for opportunities "within our own happy zone."

Ignore Political and Economic Forecasts

"We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors."

Thirty years of unpredictable events (Vietnam War, oil shocks, Soviet Union dissolution, 508-point Dow drop) never dented Ben Graham's investment principles.

Fear vs. Fundamentals

"Fear is the foe of the faddist, but the friend of the fundamentalist."

Best purchases often come during "apprehensions about some macro event were at a peak."

Coke, Gillette, Wells Fargo Stats

• Coke: 7.8% ownership → economic interest in 21 billion servings → ~$200 million earnings
• Gillette: 7% of world razor market → ~$250 million sales attributed to Berkshire
• Wells Fargo: 13% of $53 billion bank → equivalent to $7 billion "Berkshire Bank" earning ~$100 million

Famous Quotes

"We will not ask you to invest with us and then put our own money elsewhere."

Related

• letter-1993 — Previous year
• letter-1995 — Following year
• warren-buffett
• compounding