2012 Shareholder Letter

Date: March 1, 2013 Author: Warren Buffett Company: Berkshire Hathaway

Overview

2012 per-share book value increased 14.4% (S&P 16.0%), with book value reaching $114,214 — a 19.7% compound annual return over 48 years.

Key Points

Ninth Time Underperforming

"For the ninth time in 48 years, Berkshire's percentage increase in book value was less than the S&P's percentage gain."

Eight of nine shortfalls occurred when S&P gained 15%+. "We do better when the wind is in our face."

Stock Repurchases

Used $1.3 billion to repurchase shares in 2012. Authorized repurchase at 120% of book value when price allows. Did not repurchase in 2013 because stock didn't fall to that level.

Heinz Partnership with 3G Capital

February 2013 agreement:

• Berkshire: $8B in 9% preferred stock + $4.25B for half of common
• 3G Capital (Jorge Paulo Lemann): $4.25B for half of common
• Preferred has features to increase annual return to ~12%
• Warrants to buy 5% of holding company at nominal price

3G handles operations: Bernardo Hees (Heinz CEO), Alex Behring (Chairman)

Why This Partnership Works

"Our partnership took control of Heinz in June, and operating results so far are encouraging."

Key difference from private equity: "Berkshire never intends to sell a share of the company."

Looking for More Elephants

"It's back to work; Charlie and I have again donned our safari outfits and resumed our search for elephants."

Famous Quotes

"It was a good year for Berkshire on all major fronts, except one."

Related

• letter-2011 — Previous year
• letter-2013 — Following year
• warren-buffett
• compounding