Didier Le Menestrel

Omaha, Nebraska

Whereas reading company annual reports can sometimes be a boring task, in early March it is always a delight to read Berkshire Hathaway’s Letter to Shareholders, written by the still very lively (for someone born on 30 August 1930) Warren Buffett. A delight to be shared without moderation.

This year again, the “Pope of Value” has plenty to trumpet about: with growth of 18.2% in the intrinsic value of the company, he has posted a flattering annual performance of 19.7% for the past 49 years!

However, it is not the wise old man’s style to cry victory! Especially since for the first time in its history the group has underperformed the S&P500 for four out of the past five years. Who would have thought that with $34.2bn in gains in 2013, Berkshire Hathaway would underperform the flagship index of the US stockmarket? Reassuringly, however, these performances remain remarkable during a complicated economic cycle, thanks to the slight decline in 2008 (-9.6%) relative to the famous US index (-37%), which has been so hard to beat since.

Every year, the “Oracle of Omaha” as the Letter is most commonly known, takes us by surprise. This time round, the novelty is almost revolutionary with the publication of a photograph in an annual report that has contained no images for 48 years. The symbol is stronger than it would first appear since the photograph is of the entire Berkshire corporate team (minus two who couldn’t make it) brought together for the 2013 Christmas dinner. The entire team, namely 24 people in all, for a group that now includes, following the recent acquisition of Heinz, 330,745 employees throughout the world… How attractive is America!

Even more surprising is the increasingly marked affirmation of Mr Buffet’s faith (the word is not too strong) in the future of his country. Already, right in the middle of the subprime crisis when the developed world was preparing for the worst, he qualified the acquisition of Burlington Northern Santa Fe (for $34bn) as “a bet on the economic future of the US”. Five years later, Mr Buffet reminds us that since 1965 and the acquisition of Berkshire, he has often undertaken this type of operation with his partner Charlie Munger, with whom he has “always considered a “bet” on ever-rising US prosperity to be very close to a sure thing […] America’s best days lie ahead”. Rare are the investors that evoke their profound convictions this clearly, especially when they are based on faith more than figures and logical deduction. Whatever the case, today, the facts are there, and “dear Warren” was evidently right in believing in the supremacy of the American economic model compared with that of all other economies.

The Letter is dotted with anecdotes reflecting the mindset of this man and his different perception of the world. Again in the patriotic vein that animates this year’s Letter, he tells the story of the 1983 acquisition of Nebraska Furniture Mart from the Blumkin family. Instead of congratulating himself on multiplying the company’s sales over 30 years, he simply takes the opportunity to remind us that Mrs Rose Blumkin who sold him the company “without the involvement of lawyers”, was then 89 years old and that she worked until the age of 103 (“definitely my type of woman”), the punch line being that “she never spent a day in school … emigrated from Russia to America knowing not a word of English… and loved her adopted country”. A business lesson for all students…

And if one day you would like to visit Omaha in Nebraska (the next Berkshire Shareholders’ Meeting takes place on May 3rd), above all read this heartening Letter. In it, you can find “in WB’s way”, all the good addresses of the town and actively take part in the performances of this “wise old man” never lacking humour or publicity. Thank you Mr Buffett!

Didier Le Menestrel

1 www.berkshirehathaway.com