Operating earnings matter, not market gains
“Focus on operating earnings, paying little attention to gains or losses of any variety.”
Business
Buybacks make book value misleading
“The math of [transactions below intrinsic value] is simple: Each transaction makes per-share intrinsic value go up, while per-share book value goes down. That combination causes the book-value scorecard to become increasingly out of touch with economic reality.”
Adjusted EBITDA excludes real costs
“Too often, [corporate CEOs'] presentations feature ‘adjusted EBITDA,’ a measure that redefines ‘earnings’ to exclude a variety of all-too-real costs.”
Rising earnings, fewer shares usually reward owners
“When earnings increase and shares outstanding decrease, owners – over time – usually do well.”
Never caught short of cash
“At times, our stock will tumble as investors flee from equities. But I will never risk getting caught short of cash.”
No predictions about stock behaviour
“Charlie and I have no idea as to how stocks will behave next week or next year. Predictions of that sort have never been a part of our activities.”
Good businesses are too rare to sell
“Truly good businesses are exceptionally hard to find. Selling any you are lucky enough to own makes no sense at all.”
Buybacks make shareholder information vital
“When a company says that it contemplates repurchases, it’s vital that all shareholder-partners be given the information they need to make an intelligent estimate of value.”
No budget means no quarterly number
“Our lack of [a company-wide budget] means that the parent company has never had a quarterly ‘number’ to hit. Shunning the use of this bogey sends an important message to our many managers, reinforcing the culture we prize.”
Playing with numbers rarely stops once
“Playing with the numbers ‘just this once’ may well be the CEO’s intent; it’s seldom the end result. And if it’s okay for the boss to cheat a little, it’s easy for subordinates to rationalize similar behavior.”
Poor underwriting can drown float's benefits
“[Berkshire's underwriting record] is no accident: Disciplined risk evaluation is the daily focus of our insurance managers, who know that the benefits of float can be drowned by poor underwriting results.”
Rational people don't risk what they need
“Rational people don’t risk what they have and need for what they don’t have and don’t need.”
Paid to hold other people's money
“In effect, we have been paid in most years for holding and using other people’s money.”
Insurance mistakes can take years to surface
“As I have often done before, I will emphasize that [underwriting earnings] is far from a sure thing: Mistakes in assessing insurance risks can be huge and can take many years to surface.”
Investment results converge with business results
“On occasion, a ridiculously-high purchase price for a given stock will cause a splendid business to become a poor investment – if not permanently, at least for a painfully long period. Over time, however, investment performance converges with business performance.”
Living standards rose on savings
“If our forefathers had instead consumed all they produced, there would have been no investment, no productivity gains and no leap in living standards.”
Americans gain when all nations thrive
“About [other countries' bright futures], we should rejoice: Americans will be both more prosperous and safer if all nations thrive.”