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1999 Shareholder Letter

Buffett's 1999 letter admits his worst absolute and relative performance ('a D in capital allocation'), discusses Jordan's Furniture and MidAmerican acquisitions, and explains why S&P returns will be lower going forward.

buffettberkshire1999MidAmericanacquisitionsannual-letter

1999 Shareholder Letter

Date: March 1, 2000 Author: Warren Buffett Company: Berkshire Hathaway

Overview

1999 net worth increased only $358 million or 0.5% (S&P 21%) — Buffett's worst absolute and relative performance of his tenure. Per-share book value reached $37,987 — a 24.0% compound annual return over 35 years.

Key Points

Worst Year — Grade D

"The numbers on the facing page show just how poor our 1999 record was. We had the worst absolute performance of my tenure and, compared to the S&P, the worst relative performance as well."

Buffett took full responsibility: "My 'one subject' is capital allocation, and my grade for 1999 most assuredly is a D."

Several major investees had disappointing operating results, hurting the equity portfolio.

Two Acquisitions — All Cash

  1. Jordan's Furniture — acquired for cash
  2. MidAmerican Energy — contracted to buy a major portion, all cash

"We bought both for cash, issuing no Berkshire shares. Deals of that kind aren't always possible, but that is the method of acquisition that Charlie and I vastly prefer."

Why S&P Will Underperform

Buffett predicted S&P 500 returns over the next decade or two would be "far less well than it has done since 1982."

Future Expectations

"For Berkshire, truly large superiorities over that index are a thing of the past."

Only "modest" superiority expected going forward, due to:

  • Higher stock prices then available
  • Much smaller capital base in early years = wider range of opportunities

Famous Quotes

"I think you're spending too much time on that one subject." — Coach to struggling quarterback

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