Deconstructing Berkshire Hathaway
Berkshire Hathaway released its 2010 annual report last weekend, including the letter to shareholders from Chairman Warren Buffett that is always eagerly awaited by the investment community. We are gratified to find that Mr. Buffett's legendary ability to simplify complex issues remains undiminished and his trademark wit is as sharp as ever.
Financial journalists, eager for clues that might reveal Buffett's thoughts on where markets are headed, focused on his optimistic outlook for the future ("America's best days lie ahead") and his appetite to make further large acquisitions ("my trigger finger is itchy").
We prefer to focus on a number of issues touched on in the letter that offer investment wisdom that is equally useful today or ten years from now.
- As of year-end 2010, Berkshire held positions in excess of $1 billion in fourteen common stocks. Five of these were non-US firms: BYD Company Ltd. (China), Munich Re (Germany), POSCO (South Korea), Sanofi-Aventis (France), and Tesco plc (UK). Five years ago a similar list of twelve companies contained just one non-US firm, and ten years ago there were none. In his comments about the future of America, Mr. Buffett remarked that "human potential is far from exhausted" and that, despite many setbacks, the American system "has worked wonders for over two centuries." Judging by Berkshire's portfolio, it appears this notion applies with equal force throughout the world.




