Berkshire Hathaway increased per-share book value 4.6% in 2011

The Oracle says…

Warren Buffett published his annual letter, reporting that Berkshire Hathaway’s per-share book value increased by 4.6% in 2011. Over the last 47 years (that is, since Buffett took over), book value has grown from $19 to $99,860, a rate of 19.8% compounded annually. Also, Berkshire Hathaway has identified a successor to Buffett as chief executive; however Buffett did not name the candidate.

A few Buffett quotes from the letter:

1) “A few years back, I spent about $2 billion buying several bond issues of Energy Future Holdings, an electric utility operation serving portions of Texas. That was a mistake – a big mistake. In large measure, the company’s prospects were tied to the price of natural gas, which tanked shortly after our purchase and remains depressed...I totally miscalculated the gain/loss probabilities when I purchased the bonds. In tennis parlance, this was a major unforced error by your chairman;”

2) “Last year, I told you that ‘a housing recovery will probably begin within a year or so.’ I was dead wrong....Housing will come back - you can be sure of that...People may postpone hitching up during uncertain times, but eventually hormones take over. And while "doubling-up" may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure;”

3) “[We] favor repurchases when two conditions are met: First, a company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the company’s intrinsic business value, conservatively calculated. We have witnessed many bouts of repurchasing that failed our second test. Sometimes, of course, infractions – even serious ones – are innocent; many CEOs never stop believing their stock is cheap. In other instances, a less benign conclusion seems warranted. It doesn’t suffice to say that repurchases are being made to offset the dilution from stock issuances or simply because a company has excess cash. Continuing shareholders are hurt unless shares are purchased below intrinsic value. The first law of capital allocation – whether the money is slated for acquisitions or share repurchases – is that what is smart at one price is dumb at another.”

Berkshire Hathaway (BRK.A : NYSE : US$120350.00), Net Change: 350.00, % Change: 0.29%, Volume: 0,955

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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