Warren Buffett's Letters To Berkshire Hatahaway

Warren Buffett’s letters to the shareholders of Berkshire Hatahaway have come to be considered as one of the most significant pieces of work ever written in the world of corporate finance. The letter written in the year 1982 was no exception to this fact. In this letter Warren touched the facets of investment philosophy, diversification, selecting business managers, limitation of GAAP, mergers and acquisition and the nuances of the insuarance industry.

The structure of the letter was direct, enabling Warren to give a view of the business to the investors straight from his pen. It provided an overview of company’s finances, a look at both positives and negatives of the financial year and also a sense of company’s future growth and prospects.

Walt Disney World oened its second biggest park, Wayne Gretzky nets 92 in one season of NHL, setting the record of the most goals scored in a single season, and the S&P 500 saw some dramatic fluctuations starting at 120, dropping to 105 by mid august and recovering back to 140 by the end of the year. These factors showed a significant significant change in Berkshire’s portfolio in 1982 and the years that followed. The insurance subsidy of Berkshire showed a huge drop in the Insurance premium as compared to the year 1981. The two strong investments that reflected positive and brighter future for Berkshire were Blue Chip and Wesco Financial. These were shown as Berkshire’s future prospects fo acquistion. The Buffalo evening news also attracted a major portion of Warren’s interest due to the gained monopoly. The investments in non-controlled businesses in the year 1982 were categorized into three domains – a) Shares owned by Berkshire or its insurance subsidies; b) Shares owned by Blue Chip or Wesco c) Temporary holdings as cash substitutes. This year showed Warren’s disinvestment in a number of companies like Arcata Corporation, Cleveland-Cliff Iron Company, GATX Corporation, Media General, Pinkerton’s Inc. and SAFECO Corporation in effect increasing its investment to 176% in R.J. Reymond Industries, Inc. in terms of the number of shares. Crum &Fosters was a new entrant in the portfolio. The table of Berkshire’s investments in non-controlled businesses potrays Warren’s special love for GEICO Corporation. These changes reflect Berkshire’s unmatched market research and its belief in the strength of resourceful management. Warren makes it clear that good companies are ones that provide atleast a dollar worth of business value for every dollar of the retained earnings. He potrays the power retained earnings. The concepts learnt in this