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7 of Warren Buffett's Best Words of Wisdom from Berkshire Hathaway's 2012 Letter

By  +Follow December 29, 2013 6:30PM
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BRK.A, Warren Buffett, quotes, investing, airlines, value, quotables, best quotesWarren Buffett has, at this point, become more legend than man in the financial world. Through Berkshire Hathaway ($BRK.A),  he gives hope to everyone that a stable, well-mannered person could rise to become one of the wealthiest men in the world simply by shrewdly investing in companies with potential. Some of his biggest winners include Coca-Cola (KO) , American Express (AXP) , Procter & Gamble (PG) , and sweet deals from companies like Goldman Sachs (GS) , General Electric (GE) and Bank of America (BAC) in recent years.

His investment philosophy has been examined and re-examined thousands of times over in hopes that investors can mimic his extraordinary success. While Buffett possesses certain financial advantages and strategic positions that most investors will never have, gaining insight into his rationale for certain moves and approaches can be invaluable all the same. Here are seven of the most insightful bits from his recent letter to Berkshire Hathaway shareholders.

Berkshire’s Performance in 2012:

“To date, we’ve never had a five-year period of underperformance, having managed 43 times to surpass the S&P over such a stretch. (The record is on page 103.) But the S&P has now had gains in each of the last four years, outpacing us over that period. If the market continues to advance in 2013, our streak of five year wins will end.”

On Hunting for Future Large Acquisitions:

“Our total investment of about $12 billion soaks up much of what Berkshire earned last year. But we still have plenty of cash and are generating more at a good clip. So it’s back to work; Charlie and I have again donned our safari outfits and resumed our search for elephants.”

On Investing and Performance Benchmarks:

“One thing of which you can be certain: Whatever Berkshire’s results, my partner Charlie Munger, the company’s Vice Chairman, and I will not change yardsticks. It’s our job to increase intrinsic business value – for which we use book value as a significantly understated proxy – at a faster rate than the market gains of the S&P. If we do so, Berkshire’s share price, though unpredictable from year to year, will itself outpace the S&P over time. If we fail, however, our management will bring no value to our investors, who themselves can earn S&P returns by buying a low-cost index fund.”

On the Virtues of Owning Insurance Businesses:

“Our insurance operations shot the lights out last year. While giving Berkshire $73 billion of free money to invest, they also delivered a $1.6 billion underwriting gain, the tenth consecutive year of profitable underwriting. This is truly having your cake and eating it too.”

On Leadership Succession of Berkshire:

“Todd Combs and Ted Weschler, our new investment managers, have proved to be smart, models of integrity, helpful to Berkshire in many ways beyond portfolio management, and a perfect cultural fit. We hit the jackpot with these two. In 2012 each outperformed the S&P 500 by double-digit margins. They left me in the dust as well.

Consequently, we have increased the funds managed by each to almost $5 billion (some of this emanating from the pension funds of our subsidiaries). Todd and Ted are young and will be around to manage Berkshire’s massive portfolio long after Charlie and I have left the scene. You can rest easy when they take over.”

On Building Intrinsic Value:

“In summary, Charlie and I hope to build per-share intrinsic value by (1) improving the earning power of our many subsidiaries; (2) further increasing their earnings through bolt-on acquisitions; (3) participating in the growth of our investees; (4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value; and (5) making an occasional large acquisition. We will also try to maximize results for you by rarely, if ever, issuing Berkshire shares.”

On Failure and Why Optimism is Not a Strategy:

“The usual cause of failure is that they start with the answer they want and then work backwards to find a supporting rationale. Of course, the process is subconscious; that’s what makes it so dangerous.

Your chairman has not been free of this sin. In Berkshire’s 1986 annual report, I described how twenty years of management effort and capital improvements in our original textile business were an exercise in futility. I wanted the business to succeed and wished my way into a series of bad decisions. (I even bought another New England textile company.) But wishing makes dreams come true only in Disney movies; it’s poison in business.”

Results for GE
Teodor Gareth
24 Apr 14 07:00:36
$GE General Electric: Buying Into Europe's Recovery http://t.co/gKgSxIXjCl
Teodor Gareth
24 Apr 14 07:00:35
$GE Alstom shares surge on $13bn General Electric bid report http://t.co/irNEbgK6M5
StockNewsNet
24 Apr 14 07:00:11
$GE - GE Capital Sees U.S. Middle Market Expansion Leading to InterGrowth Co... -> http://t.co/FFA798I4Pe #stock #stocks #stockaction
Sara Gomez Arancibia
24 Apr 14 06:57:08
RT @Breakingviews: Read @pierrebri on why the General Electric/Alstom deal rumours test France's reform drive http://t.co/jKVGBBT3TE $GE
Breaking Energy
24 Apr 14 06:55:00
RT @Breakingviews: Read @pierrebri on why the General Electric/Alstom deal rumours test France's reform drive http://t.co/jKVGBBT3TE $GE
Pierre Briançon
24 Apr 14 06:54:29
RT @Breakingviews: Read @pierrebri on why the General Electric/Alstom deal rumours test France's reform drive http://t.co/jKVGBBT3TE $GE
Aurelia End
24 Apr 14 06:53:06
RT @Breakingviews: Read @pierrebri on why the General Electric/Alstom deal rumours test France's reform drive http://t.co/jKVGBBT3TE $GE
Bob Pisani
24 Apr 14 06:52:12
Rumored talks between $GE and French power generation & train maker Alstom may also help convince many that a new wave of M&A is coming.
leahanne
24 Apr 14 06:51:24
$TTDZ Triton Distribution (TTDZ) 0.0371 -0.0002 (-0.54%) $MELY $MVIS $GE http://t.co/QeD2i1GoSY
Teodor Gareth
24 Apr 14 06:50:05
$GE General Electric 'in talks to buy Alstom for $13bn' http://t.co/xRwwkWsiSE
Patrick campbell
24 Apr 14 06:49:18
RT @Breakingviews: Read @pierrebri on why the General Electric/Alstom deal rumours test France's reform drive http://t.co/jKVGBBT3TE $GE
World News
24 Apr 14 06:48:19
RT @Breakingviews: Read @pierrebri on why the General Electric/Alstom deal rumours test France's reform drive http://t.co/jKVGBBT3TE $GE
Stock Wire
24 Apr 14 06:47:45
General Electric 'in talks to buy Alstom for $13bn' $GE http://t.co/ROSymZ7ZYz
Stock Wire
24 Apr 14 06:47:44
General Electric: Buying Into Europe's Recovery $GE http://t.co/jjreCFdptp
Stock Wire
24 Apr 14 06:47:43
Alstom shares surge on $13bn General Electric bid report $GE http://t.co/LJpwU4bfuw
News 1800
24 Apr 14 06:47:27
RT @Breakingviews: Read @pierrebri on why the General Electric/Alstom deal rumours test France's reform drive http://t.co/jKVGBBT3TE $GE
Alexandre Delaigue
24 Apr 14 06:47:17
RT @Breakingviews: Read @pierrebri on why the General Electric/Alstom deal rumours test France's reform drive http://t.co/jKVGBBT3TE $GE
Reuters Top News
24 Apr 14 06:46:40
RT @Breakingviews: Read @pierrebri on why the General Electric/Alstom deal rumours test France's reform drive http://t.co/jKVGBBT3TE $GE
ReutersBreakingviews
24 Apr 14 06:45:20
Read @pierrebri on why the General Electric/Alstom deal rumours test France's reform drive http://t.co/jKVGBBT3TE $GE
Zonebourse News
24 Apr 14 06:45:03
Les éléments manquent pour bien valoriser Alstom - DJ Plus http://t.co/mk5gjEkpQ3 $EN $GE
Matthew Taylor
24 Apr 14 06:41:45
RT @GE_Reports: In 2013, $GE delivered 38% total shareowner return, exceeding the Dow and S&P 500 http://t.co/tJ8ylVkAoY #shareowners http:…
BBG Energy News
24 Apr 14 06:36:17
Our scoop on GE in talks to buy Alstom | http://t.co/bugfnTivpA $GE $ALO
Daniele Crisci
24 Apr 14 06:34:47
Bloomberg: GE in talks to buy Alstom for USD 13 billion http://t.co/WbYC4pwf7Z $GE $ALO
Kym L
24 Apr 14 06:34:43
$GE looking to fill the gap
Brad Clarkson
24 Apr 14 06:30:43
@RyanRoot216 $GE will have a great day!
Quantpost Industrial
24 Apr 14 06:26:42
$GE News Alert: http://t.co/jEoXHG5Ny4 Updated options view: https://t.co/VgV6Q4XFBM All options views: https://t.co/FSbCrPyn9s
Benzinga.com
24 Apr 14 06:26:41
General Electric Rumored To Buy #Alstom For $13 Billion Or More http://t.co/h50uAHPlAi $GE
MarketWatch $GE
24 Apr 14 06:22:38
Stock market live: Apple powers rally; Facebook bounces; gold dives http://t.co/NJHI0yuy3P $GE
Open Outcrier
24 Apr 14 06:22:24
$GE Said in Talks to Buy France’s Alstom for $13 Billion http://t.co/kdd0yoNgvR
Breaking News
24 Apr 14 06:21:01
Ellis Medicine Winner of 2014 North America Enterprise Information and Master Data Management Excellence Aw... $GE http://t.co/F0M0Ny0kbD
Byrne Bray
24 Apr 14 06:19:33
$GE GE Antares Capital Agents $166 Million Cross-Border Facility for Audax Group’s Acquisition of Luminator Technology...
4-traders.com
24 Apr 14 06:15:05
General Electric : Ellis Medicine Winner of 2014 North America Enterprise Information and Master Data Manag... http://t.co/HzMN0V7ctx $GE
HAEFELY HIPOTRONICS
24 Apr 14 06:13:33
RT @BloombergNews: FLASH: GE in talks to buy Alstom SA, the French builder of trains and power plants: http://t.co/DxMVmPhAio $GE $ALO
Brian Courtney
24 Apr 14 06:08:03
RT @GE_Reports: In 2013, $GE returned $7.8B in dividends and $10.4B in stock repurchases: http://t.co/kuwevDTsCK #shareowners
Pierce Crosby
24 Apr 14 06:07:21
I dunno who Browning talked to... Serious rumour churn. $GE #activists
GavinGreenberg
24 Apr 14 06:00:25
$GE: GE Antares Capital Agents $166 Million Cross-Border Facility for Audax... http://t.co/knxpG3ncam
Silence Dogood 2.0
24 Apr 14 05:57:01
RT @TheKillir: @ShortTreasuries agreed, just really sad the $13B from $GE is going to support jobs NOT in the US due to an antiquated tax p…
AR. H. Qadri
24 Apr 14 05:56:16
#Alstom shares jump on $GE bid report http://t.co/6hODdzz0af
Tsachy Mishal
24 Apr 14 05:55:51
Instead of holding cash overseas & borrowing in US, some US companies now looking at overseas acquisitions $GE $PFE
Tara Lachapelle
24 Apr 14 05:54:51
RT @Real_MNA: $GE's $57 billion cash overseas said to fuel Alstom acquisition: http://t.co/LGU3BpAdWo by @jonny_browning
Tara Lachapelle
24 Apr 14 05:54:47
RT @Real_MNA: $GE's Immelt pursuing biggest deal in effort to jump-start growth: http://t.co/MrX2viTGPX by Richard Clough & @blsuth
Bloomberg Real M&A
24 Apr 14 05:54:43
$GE's $57 billion cash overseas said to fuel Alstom acquisition: http://t.co/LGU3BpAdWo by @jonny_browning
Bloomberg Real M&A
24 Apr 14 05:53:54
$GE's Immelt pursuing biggest deal in effort to jump-start growth: http://t.co/MrX2viTGPX by Richard Clough & @blsuth
Steve Thompson
24 Apr 14 05:53:47
@zerohedge $GE re-enters power systems products that it had exited in the 1970's & 80's? Well positioned for the next damaging solar flare!
Heath Sterling
24 Apr 14 05:52:58
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Laird Cabrera
24 Apr 14 05:51:46
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Lars Kingston
24 Apr 14 05:48:45
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Stock Herald
24 Apr 14 05:45:06
$GE: Alstom shares jump on report of GE bid http://t.co/1rbh8CgoIU
Stockaholics
24 Apr 14 05:42:27
After 4,000% gains on picks so far in 2014, our Alert on $QASP is On the Move! Big News: http://t.co/KYyg9e2V2z $BMSN $C $GE
Brandon Bennett
24 Apr 14 05:42:13
Rumored deal between $GE and $ALSMY looks pretty appealing. $13b for $22b in sales, look for margins to improve if $GE controls #stocks
				
				
By  +Follow December 29, 2013 6:30PM
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