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However, our belief is that, in aggregate, those undistributed and, therefore, unrecorded earnings will be translated into tangible value for…

We know that this translation of non-controlled ownership earnings into corresponding realized and unrealized capital gains for Berkshire will be…

Operating earnings of $31.5 million in 1982 amounted to only 9.8% of beginning equity capital (valuing securities at cost), down from 15.2% in 1981…

(3) a continually-enlarging commitment of our resources to investment in partially-owned, nonoperated businesses; accounting rules dictate that a…

It was only a few years ago that we told you that the operating earnings/equity capital percentage, with proper allowance for a few other variables,…

To managers faced with such deterioration, a more flexible measurement system often suggests itself: just shoot the arrow of business performance…

o Our long-term economic goal (subject to some qualifications mentioned later) is to maximize the average annual rate of gain in intrinsic business…

o Our preference would be to reach this goal by directly owning a diversified group of businesses that generate cash and consistently earn…

o Because of this two-pronged approach to business ownership and because of the limitations of conventional accounting, consolidated reported…

o Accounting consequences do not influence our operating or capital-allocation decisions. When acquisition costs are similar, we much prefer to…

Our gain in net worth during 1984 was $152.6 million, or $133 per share. This sounds pretty good but actually it’s mediocre. Economic gains must be…

As we discussed last year, the gain in per-share intrinsic business value is the economic measurement that really counts. But calculations of…

Using my academic voice, I have told you in the past of the drag that a mushrooming capital base exerts upon rates of return. Unfortunately, my…

The table on the following page shows the sources of Berkshire’s reported earnings. Berkshire’s net ownership interest in many of the constituent…

You may remember the wildly upbeat message of last year’s report: nothing much was in the works but our experience had been that something big popped…

Two factors make anything approaching this rate of gain unachievable in the future. One factor probably transitory - is a stock market that offers…

This change in the market also has negative implications for our present portfolio. In our 1974 annual report I could say: “We consider several of…

The second negative factor, far more telling, is our size. Our equity capital is more than twenty times what it was only ten years ago. And an iron…

In past reports I have noted that book value at most companies differs widely from intrinsic business value - the number that really counts for…

The good news is that in 1986 our percentage gain in business value probably exceeded the book value gain. I say "probably" because business value is…

A large measure of our improvement in business value relative to book value reflects the outstanding performance of key managers at our major…

So much for the good news. The bad news is that my performance did not match that of our managers. While they were doing a superb job in running…

What counts, of course, is the rate of gain in per-share business value, not book value. In many cases, a corporation's book value and business value…

At Berkshire, however, my appraisal of our operating managers is, if anything, understated. To understand why, first take a look at page 7, where…

By itself, this figure says nothing about economic performance. To evaluate that, we must know how much total capital - debt and equity - was…

If these seven business units had operated as a single company, their 1987 after-tax earnings would have been approximately $100 million - a return…

We’ve emphasized in past reports that what counts, however, is intrinsic business value - the figure, necessarily an estimate, indicating what all of…

Berkshire’s past rates of gain in both book value and business value were achieved under circumstances far different from those that now exist.…

Important negatives affecting our prospects today are: (1) a less attractive stock market than generally existed over the past 24 years; (2) higher…

As a partial offset to the drag that our growing capital base exerts upon returns, we have a very important advantage now that we lacked 24 years ago…

What counts, however, is intrinsic value - the figure indicating what all of our constituent businesses are rationally worth. With perfect foresight,…

Back when Berkshire's book value was $19.46, intrinsic value was somewhat less because the book value was entirely tied up in a textile business…

The rear-view mirror is one thing; the windshield is another. A large portion of our book value is represented by equity securities that, with…

We will keep most of our major holdings, regardless of how they are priced relative to intrinsic business value. This 'til- death-do-us-part attitude…

Last year we made a prediction: "A reduction [in Berkshire's net worth] is almost certain in at least one of the next three years." During much of…

Our growth rate was lackluster in 1990 because our four major common stock holdings, in aggregate, showed little change in market value. Last year…

Berkshire's 26-year record is meaningless in forecasting future results; so also, we hope, is the one-year record. We continue to aim for a 15%…

If we do attain that 15% average, our shareholders should fare well. However, Berkshire's corporate gains will produce an identical gain for a…

The size of our equity capital - which now totals $7.4 billion - makes it certain that we cannot maintain our past rate of gain or, for that matter,…

Charlie Munger, Berkshire's Vice Chairman, and I have set a goal of attaining a 15% average annual increase in Berkshire's intrinsic value. If our…

Our outsized gain in book value in 1991 resulted from a phenomenon not apt to be repeated: a dramatic rise in the price- earnings ratios of Coca-Cola…

Coca-Cola and Gillette are two of the best companies in the world and we expect their earnings to grow at hefty rates in the years ahead. Over time,…

During the year, Berkshire's net worth increased by $1.52 billion. More than 98% of this gain came from earnings and appreciation of portfolio…

Those two objectives do not necessarily go hand-in-hand as an amusing but value-destroying experience in our past illustrates. On that occasion, we…

You will remember that our goal is to increase our per-share intrinsic value - for which our book value is a conservative, but useful, proxy - at a…

You should keep at least three points in mind as you evaluate this data. The first point concerns the many businesses we operate whose annual…

1. The first negative was produced by a change in Generally Accepted Accounting Principles (GAAP) having to do with the taxes we accrue against…

3. Another 1993 change in GAAP affects the value at which we carry the securities that we own. In recent years, both the common stocks and certain…

4. Finally, we issued some stock last year. In a transaction described in last year's Annual Report, we issued 3,944 shares in early January, 1993…

Of course, it's per-share intrinsic value, not book value, that counts. Book value is an accounting term that measures the capital, including…

The problem is not that what has worked in the past will cease to work in the future. To the contrary, we believe that our formula - the purchase…

A fat wallet, however, is the enemy of superior investment results. And Berkshire now has a net worth of $11.9 billion compared to about $22…

We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen. Thirty years ago,…

But, surprise - none of these blockbuster events made the slightest dent in Ben Graham's investment principles. Nor did they render unsound the…

Our gain in net worth during 1995 was $5.3 billion, or 45.0%. Per-share book value grew by a little less, 43.1%, because we paid stock for two…

Even so, we do have a few advantages, perhaps the greatest being that we don't have a strategic plan. Thus we feel no need to proceed in an…

In making acquisitions, we have a further advantage: As payment, we can offer sellers a stock backed by an extraordinary collection of outstanding…

Concluding this little dissertation on acquisitions, I can't resist repeating a tale told me last year by a corporate executive. The business he grew…

Our gain in net worth during 1996 was $6.2 billion, or 36.1%. Per- share book value, however, grew by less, 31.8%, because the number of Berkshire…

The restatement was required because GEICO became a wholly-owned subsidiary of Berkshire on January 2, 1996, whereas it was previously classified…