2016 Shareholder Letter
Buffett's 2016 letter discusses the shift from securities to operating businesses, explains the book value limitations, and reviews Berkshire's diverse business portfolio.
2016 Shareholder Letter
Date: February 25, 2017 Author: Warren Buffett Company: Berkshire Hathaway
Overview
2016 per-share book value increased 10.7% (S&P 12.0%), with book value reaching $172,108 — a 19.0% compound annual return over 52 years.
Key Points
Book Value vs Intrinsic Value
"During the first half of those years, Berkshire's net worth was roughly equal to the number that really counts: the intrinsic value of the business."
Early on, most resources were in marketable securities "regularly revalued to their quoted prices." Now the focus is on "outright ownership of businesses" with different accounting rules.
The Accounting Disconnect
The accounting rules only write down impaired assets — "winners are never revalued upwards." This means book value increasingly understates intrinsic value.
Consistent Operating Performance
Operating businesses delivered "consistent and satisfactory operating earnings" across all quarters, showing the strength of Berkshire's underlying companies.
Famous Quotes
"In Wall Street parlance, our balance sheet was then in very large part 'marked to market.'"
Related
- letter-2015 — Previous year
- letter-2017 — Following year
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- intrinsic-value