a celebration of capitalism

Warren Buffett is the CEO of Berkshire Hathaway, one of the world’s richest men (worth roughly $36 billion) and the most famous value investor.  Company stock prices often rise and fall upon his actions to buy or sell as investors follow his every move.

I recently read Buffett’s annual letter to the shareholders of Berkshire and was struck by how decidedly different his letter was from the slick publications most corporations provide their shareholders.

You will find no full-color pictures of officers, legalese or technical accounting jargon, only witty humor, simple explanations of the company’s business transactions and clear answers as to why its ventures proved profitable (historically the case) or otherwise during the past year.  Buffett likes to include financial reports in addition to the required GAAP financials that present the company’s activities in a more straightforward and logical fashion.  Fascinating details of how billion dollar deals were made or broken make the report hard to put down.

In an age of Internet stocks and day trading, Buffett is the anti-tech.  Mr. Buffett is old school and proud of it.  He prefers a novel approach to investing; understanding what a business is all about before buying into it.  He also buys for the long term, rarely ever selling off a company or stock he has purchased.  The sixty-nine year old touts his latest purchases of Benjamin Moore Paints, Acme Brick, Shaw Industries (carpet) and Justin Boots in this year’s report - nothing to get your heart rate up there. 

Berkshire prefers to purchase entire companies rather than shares of stock and then encourages the original owners and management to continue operating the business in the style that made them successful in the first place.  As Buffett states, his expertise is in identifying profitable businesses, not operating jewelry stores or manufacturing companies.

You might expect hundreds or possibly thousands of employees would be required at corporate headquarters in Omaha, Nebraska in order to keep up with all the activity from Berkshire’s varied subsidiaries.  A visit would prove you wrong.  The company employs 13.8 employees after reluctantly adding one this year.  Does this give us a true picture of corporate inefficiency elsewhere?

Warren Buffett maintains an extremely modest lifestyle despite his fortune gained through entrepreneurship and wise investing in some of America’s best companies.  Mr. Buffett’s annual salary is $100,000 - a mere pittance compared to the multi-million dollar salaries and bonuses executives receive at some of the Fortune 500 companies that Berkshire invests in.

Perhaps most intriguing is Berkshire’s annual shareholder meeting held in Omaha.  14,000 investors descend on this Midwestern town to pick the brains of Buffett for hours, play softball against him and purchase everything from Dairy Queen ice cream to GEICO insurance from the company they hold a stake in.  It is indeed a celebration of capitalism.

Greg Beadles

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