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Nuggets of wisdom from Warren Buffett's letter to shareholders

Berkshire Hathaway Inc. released its annual letter to shareholders on Saturday, with its usual combination of blunt outlook and dry humour from chief executive Warren Buffett. Some highlights:

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ON BERKSHIRE’S PERFORMANCE: “To date, we’ve never had a five-year period of under-performance, having managed 43 times to surpass the S&P over such a stretch. ... But the S&P has now had gains in each of the last four years, outpacing us over that period. If the market continues to advance in 2013, our streak of five-year wins will end.”
In photo: Mr. Buffett tours the trade show floor during the Berkshire Hathaway Annual shareholders meeting in Omaha, May 5, 2012.

© Lane Hickenbottom/REUTERS

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ON ECONOMIC UNCERTAINTY: “A thought for my fellow CEOs: Of course, the immediate future is uncertain; America has faced the unknown since 1776. It’s just that sometimes people focus on the myriad of uncertainties that always exist while at other times they ignore them [usually because the recent past has been uneventful]. If you are a CEO who has some large, profitable project you are shelving because of short-term worries, call Berkshire. Let us unburden you.”
In photo, a man looks at a stock quotation board outside a brokerage in Tokyo.

Toru Hanai/REUTERS

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ON ACQUISITIONS THIS YEAR, AFTER A $12-BILLION (U.S.) DEAL IN FEBRUARY FOR HEINZ: “Our total investment of about $12-billion soaks up much of what Berkshire earned last year. But we still have plenty of cash and are generating more at a good clip. So it’s back to work; Charlie [Munger, Berkshire’s vice-chairman] and I have again donned our safari outfits and resumed our search for elephants.”
In photo, the former Heinz factory, now home to loft apartments, overlooks Pittsburgh, Penn.’s North Side.


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ON ACQUISITIONS LAST YEAR: “I pursued a couple of elephants, but came up empty-handed.”
In photo, Mr. Buffett arrives at the Allen & Company Sun Valley Conference in Sun Valley, Idaho, July 13, 2012.

Paul Sakuma/AP

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ON NEWSPAPER ACQUISITIONS: “Charlie and I love newspapers and, if their economics make sense, will buy them even when they fall far short of the size threshold we would require for the purchase of, say, a widget company. We do not believe that success will come from cutting either the news content or frequency of publication. Indeed, skimpy news coverage will almost certainly lead to skimpy readership. And the less-than-daily publication that is now being tried in some large towns or cities – while it may improve profits in the short term – seems certain to diminish the papers’ relevance over time.”

Alex Slobodkin/Getty Images/iStockphoto

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ON THE INSURANCE INDUSTRY’S FINANCIAL PROSPECTS: “A further unpleasant reality adds to the industry’s dim prospects: Insurance earnings are now benefiting from ‘legacy’ bond portfolios that deliver much higher yields than will be available when funds are reinvested during the next few years – and perhaps for many years beyond that. Today’s bond portfolios are, in effect, wasting assets. Earnings of insurers will be hurt in a significant way as bonds mature and are rolled over.”
In photo, the Swiss Reinsurance Co. Ltd. building, also known as ‘the Gherkin,’ in London. / GETTY

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ON INFRASTRUCTURE INVESTMENTS: “Our managers must think today of what the country will need far down the road. Energy and transportation projects can take many years to come to fruition; a growing country simply can’t afford to get behind the curve.” Images

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ON STICKING TO A NO-DIVIDEND POLICY: “We will stick with this policy as long as we believe our assumptions about the book-value buildup and the market-price premium seem reasonable. If the prospects for either factor change materially for the worse, we will reexamine our actions.”

vichie81/Getty Images/iStockphoto

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ON BERKSHIRE’S 2013 SPENDING: “We will keep our foot to the floor and will almost certainly set still another record for capital expenditures in 2013. Opportunities abound in America.”
In photo, Mr. Buffett speaks on the sale of the Omaha World-Herald company to Berkshire Hathaway Nov. 30, 2011 in Omaha, Neb.

JEFF BUNDY/The Associated Press

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