2014 Shareholder Letter

Date: February 27, 2015 Author: Warren Buffett Company: Berkshire Hathaway

Overview

2014 per-share book value increased 8.3% (S&P 13.7%), with book value reaching $146,186 — a 19.4% compound annual return over 50 years. This was Berkshire's 50th anniversary under Buffett's leadership.

Key Points

50th Anniversary

"Fifty years ago, today's management took charge at Berkshire."

50 years of 19.4% compound annual gain. Over the same period, S&P gained 9.9% annually.

Intrinsic Value Far Exceeds Book Value

"Today, our emphasis has shifted in a major way to owning and operating large businesses. Many of these are worth far more than their cost-based carrying value. But that amount is never revalued upward no matter how much the value of these companies has increased."

The difference between intrinsic value and book value has "materially widened."

Kraft Foods Deal

"We completed two large acquisitions, spending almost $18 billion to purchase all of NV Energy and a major interest in H. J. Heinz."

With Heinz, created a partnership template with 3G Capital. Berkshire is "the financing partner" — $8B in 9% preferred + $4.25B for common. "Berkshire never intends to sell a share of the company."

New Performance Table

Added "annual percentage change in per-share market value" to the performance table. Market price gain since 1964: 1,826,163% vs book value gain of 751,113%.

Why Market Value Matters

"Over time, stock prices and intrinsic value almost invariably converge."

The 50-year gain in Berkshire's per-share intrinsic value is "roughly equal to the 1,826,163% gain in market price."

Famous Quotes

"The increase in Berkshire's per-share intrinsic value over the past 50 years is roughly equal to the 1,826,163% gain in market price."

Related

• letter-2013 — Previous year
• letter-2015 — Following year
• warren-buffett
• compounding