Author: root

  • 1989

    Taxes and Berkshire’s investment policy Because of the way the tax law works, the Rip Van Winkle style of investing that we favor—if successful—has an important mathematical edge over a more frenzied approach. Let’s look at an extreme comparison. Imagine that Berkshire had only $1, which we put in a security that doubled by yearend…

  • 1988

    What needs to be reported What needs to be reported is data—whether GAAP, non-GAAP, or extra-GAAP—that helps financially-literate readers answer three key questions: (1) Approximately how much is this company worth? (2) What is the likelihood that it can meet its future obligations? and (3) How good a job are its managers doing, given the…

  • 1987

    Severe change and exceptional returns usually don’t mix. Most investors, of course, behave as if just the opposite were true. That is, they usually confer the highest price-earnings ratios on exotic-sounding businesses that hold out the promise of feverish change. That prospect lets investors fantasize about future profitability rather than face today’s business realities. For…

  • 1986

    We intend to continue our practice of working only with people whom we like and admire. This policy not only maximizes our chances for good results, it also ensures us an extraordinarily good time. On the other hand, working with people who cause your stomach to churn seems much like marrying for money—probably a bad…

  • 1985

    You might think that institutions, with their large staffs of highly-paid and experienced investment professionals, would be a force for stability and reason in financial markets. They are not: stocks heavily owned and constantly monitored by institutions have often been among the most inappropriately valued. Ben Graham told a story 40 years ago that illustrates…

  • 1984

    Berkshire acquires the Nebraska Furniture Mart founded by Rose Blumkin I have been asked by a number of people just what secrets the Blumkins bring to their business. These are not very esoteric. All members of the family: (1) apply themselves with an enthusiasm and energy that would make Ben Franklin and Horatio Alger look…

  • 1983

    In 1983 Buffett created an owner’s manual for Berkshire shareholders. The current version is available at http://www.berkshirehathaway.com/ownman.pdf One question I always ask myself in appraising a business is how I would like, assuming I had ample capital and skilled personnel, to compete with it. We never take the one-year figure very seriously. After all, why…

  • 1982

    Yardsticks seldom are discarded while yielding favorable readings. But when results deteriorate, most managers favor disposition of the yardstick rather than disposition of the manager. Our partial-ownership approach can be continued soundly only as long as portions of attractive businesses can be acquired at attractive prices. We need a moderately-priced stock market to assist us…

  • 1981

    Regardless of the impact upon immediately reportable earnings, we would rather buy 10% of Wonderful Business T at X per share than 100% of T at 2X per share. Most corporate managers prefer just the reverse, and have no shortage of stated rationales for their behavior. However, we suspect three motivations—usually unspoken—to be, singly or…

  • 1980

    The value to Berkshire Hathaway of retained earnings is not determined by whether we own 100%, 50%, 20% or 1% of the businesses in which they reside. Rather, the value of those retained earnings is determined by the use to which they are put and the subsequent level of earnings produced by that usage. (We…

  • 1979

    The primary test of managerial economic performance is the achievement of a high earnings rate on equity capital employed (without undue leverage, accounting gimmickry, etc.) and not the achievement of consistent gains in earnings per share. For the inflation rate, coupled with individual tax rates, will be the ultimate determinant as to whether our internal…

  • 1978

    We make no attempt to predict how security markets will behave; successfully forecasting short term stock price movements is something we think neither we nor anyone else can do. The textile industry illustrates in textbook style how producers of relatively undifferentiated goods in capital intensive businesses must earn inadequate returns except under conditions of tight…

  • 1977

    Just as it would be foolish to focus unduly on short-term prospects when acquiring an entire company, we think it equally unsound to become mesmerized by prospective near term earnings or recent trends in earnings when purchasing small pieces of a company; i.e., marketable common stocks. We select our marketable equity securities in much the…

  • Gap-up short statistics

    After looking for stocks/patterns to trade and creating a database of candidates over a number of years I wanted to know: Is there a set of variables that will reliably predict how a stock is going to perform? The question I’m trying to answer: using tracking data from my database (containing mostly low-priced, low-float stocks),…

  • Setting up Mozilla Firefox

    Since a lot of users spend large portions of their screen time in the browser it makes sense to invest a little effort in a good setup. No browser is perfect because people have different views on what that means. This post is not about making any claims of browser superiority—use whichever product you prefer.…

  • A wish list for Apple

    Who knows, maybe someone at Apple will see this, so here’s a list of things that I noticed and that maybe could be improved: System Preferences Safari Finder macOS Apple Books Preview app Keynote/Pages/Numbers

  • Renaissance Technologies

    After reading Gregory Zuckerman’s The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution I wanted to find out more about Renaissance Technologies (RenTec). There are a ton of interviews with Jim Simons and other videos related to Renaissance/Medallion on YouTube but I could not find anything that doesn’t just basically repeat…