2011 Shareholder Letter

Date: February 25, 2012 Author: Warren Buffett Company: Berkshire Hathaway

Overview

2011 per-share book value increased 4.6% (S&P 2.1%), with book value reaching $99,860 — a 19.8% compound annual return over 47 years.

Key Points

Succession Planning

"The primary job of a Board of Directors is to see that the right people are running the business and to be sure that the next generation of leaders is identified and ready to take over tomorrow."

Two new investment managers join:

• Todd Combs (joined early 2011)
• Ted Weschler (joined shortly after yearend 2011)

Both "will be handling a few billion dollars in 2012, but have the brains, judgment and character to manage our entire portfolio when Charlie and I are no longer running Berkshire."

Buffett's successor as CEO identified (with two back-up candidates). Over 98% of Buffett's net worth is in Berkshire stock.

Lubrizol Acquisition

Acquired September 16, 2011:

• Worldwide producer of additives and specialty chemicals
• Under James Hambrick (CEO since 2004): $147M → $1,085M pre-tax profits
• Already agreed to three bolt-on acquisitions for $493M

Powerhouse Five Achievements

Each of the five largest non-insurance companies set records:

• BNSF, Iscar, Lubrizol, Marmon, MidAmerican Energy
• Combined pre-tax earnings: over $9 billion in 2011
• Seven years ago only MidAmerican was owned ($393M pre-tax)

Major Investments

• Bank of America: $5B 6% preferred + warrants to buy 700M shares at $7.14
• IBM: $10.9B for 63.9M shares
• Now large stakes in four companies: American Express (13%), Coca-Cola (8.8%), IBM (5.5%), Wells Fargo (7.6%)

Record Capital Spending

$8.2 billion spent on property, plant, equipment in 2011 — 95% in the U.S.

Famous Quotes

"About 95% of these outlays were made in the U.S., a fact that may surprise those who believe our country lacks investment opportunities."

Related

• letter-2010 — Previous year
• letter-2012 — Following year
• warren-buffett
• compounding