1961 Letter BUFFETT PARTNERSHIP, LTD. 810 KIEWIT PLAZA OMAHA 31, NEBRASKA
January 24, 1962
Our Performance in 1961
I have consistently told partners that it is my expectation and hope (it's always hard to tell which is which) that we will do relatively well compared to the general market in down or static markets, but that we may not look so good in advancing markets. In strongly advancing markets I expect to have real difficulty keeping up with the general market.
Although 1961 was certainly a good year for the general market, and in addition, a very good year for us on both an absolute and relative basis, the expectations in the previous paragraph remain unchanged.
During 1961, the general market as measured by the Dow-Jones Industrial Average (hereinafter called the “Dow”) showed an over-all gain of 22.2% including dividends received through ownership of the Dow. The gain for all partnerships operating throughout the entire year, after all expenses of operation, but before payments to limited partners or accrual to the general partner, averaged 45.9%. The details of this gain by partnership are shown in the appendix along with results for the partnerships started during the year.
We have now completed five full years of partnership operation, and the results of these five years are shown below on a year-by-year basis and also on a cumulative or compounded basis. These results are stated on the basis described in the preceding paragraph; after expenses, but before division of gains among partners or payments to partners.
| Year | Partnerships Operating Entire Year | Partnership Gain | Dow-Jones Industrials Gain* |
| 1957 | 3 | 10.4% | -8.4% |
| 1958 | 5 | 40.9% | 38.5% |
| 1959 | 6 | 25.9% | 19.9% |
| 1960 | 7 | 22.8% | -6.3% |
| 1961 | 7 | 45.9% | 22.2% |
* Including dividends received through ownership of the Dow.
On a compounded basis, the cumulative results have been:
| Year | Partnership Gain | Dow-Jones Industrials Gain |
| 1957 | 10.4% | -8.4% |
| 1957-58 | 55.6% | 26.9% |
| 1057-59 | 95.9% | 52.2% |
| 1957-60 | 140.6% | 42.6% |
| 1957-61 | 251.0% | 74.3% |
These results do not measure the gain to the limited partner, which of course, is the figure in which you are most interested. Because of the varying partnership arrangements that have existed in the past, I have used the overall net gain (based on market values at the beginning and end of the year) to the partnership as being the fairest measure of over-all performance.
On a pro-forma basis adjusted to the division of gains entailed in our present Buffett Partnership, Ltd. agreement, the results would have been:
| Year | Limited Partners’ Gain | Dow Gain |
| 1957 | 9.3% | -8.4% |
| 1958 | 32.2% | 38.5% |
| 1959 | 20.9% | 19.9% |
| 1960 | 18.6% | -6.3% |
| 1961 | 35.9% | 22.2% |
| COMPOUNDED | ||
| 1957 | 9.3% | -8.4% |
| 1957-58 | 44.5% | 26.9% |
| 1957-59 | 74.7% | 52.2% |
| 1957-60 | 107.2% | 42.6% |
| 1957-61 | 181.6% | 74.3% |
A Word About Par
The outstanding item of importance in my selection of partners, as well as in my subsequent relations with them, has been the determination that we use the same yardstick. If my performance is poor, I expect partners to withdraw, and indeed, I should look for a new source of investment for my own funds. If performance is good, I am assured of doing splendidly, a state of affairs to which I am sure I can adjust.
The rub, then, is in being sure that we all have the same ideas of what is good and what is poor. I believe in establishing yardsticks prior to the act; retrospectively, almost anything can be made to look good in relation to something or other.
I have continuously used the Dow-Jones Industrial Average as our measure of par. It is my feeling that three years is a very minimal test of performance, and the best test consists of a period at least that long where the terminal level of the Dow is reasonably close to the initial level.
While the Dow is not perfect (nor is anything else) as a measure of performance, it has the advantage of being widely known, has a long period of continuity, and reflects with reasonable accuracy the experience of investors generally with the market. I have no objection to any other method of measurement of general market performance being used, such as other stock market averages, leading diversified mutual stock funds, bank common trust funds, etc.
You may feel I have established an unduly short yardstick in that it perhaps appears quite simple to do better than an unmanaged index of 30 leading common stocks. Actually, this index has generally proven to be a reasonably tough competitor. Arthur Wiesenberger’s classic book on investment companies lists performance for the 15 years 1946-60, for all leading mutual funds. There is presently over \$20 billion invested in mutual funds, so the experience of these funds represents, collectively, the experience of many million investors. My own belief, though the figures are not obtainable, is that portfolios of most leading investment counsel organizations and bank trust departments have achieved results similar to these mutual funds.
Wiesenberger lists 70 funds in his “Charts & Statistics” with continuous records since 1946. I have excluded 32 of these funds for various reasons since they were balanced funds (therefore not participating fully in the general market rise), specialized industry funds, etc. Of the 32 excluded because I felt a comparison would not be fair,
31 did poorer than the Dow, so they were certainly not excluded to slant the conclusions below.
Of the remaining 38 mutual funds whose method of operation I felt was such as to make a comparison with the Dow reasonable, 32 did poorer than the Dow, and 6 did better. The 6 doing better at the end of 1960 had assets of about \$1 billion, and the 32 doing poorer had assets of about \$6-1/2 billion. None of the six that were superior beat the Dow by more than a few percentage points a year.
Below I present the year-by-year results for our period of operation (excluding 1961 for which I don't have exact data, although rough figures indicate no variance from the 1957-60 figures) for the two largest common stock open-end investment companies (mutual funds) and the two largest closed-end investment companies:
| Year | Mass. Inv. Trust | Investors Stock | Lehman | Tri-Cont. | Dow | Limited Partners |
| 1957 | -12.0% | -12.4% | -11.4% | -2.4% | -8.4% | 9.3% |
| 1958 | 44.1% | 47.6% | 40.8% | 33.2% | 38.5% | 32.2% |
| 1959 | 8.2% | 10.3% | 8.1% | 8.4% | 19.9% | 20.9% |
| 1960 | -0.9% | -0.1% | 2.6% | 2.8% | -6.3% | 18.6% |
(From Moody’s Banks & Finance Manual, 1961)
COMPOUNDED
| Year | Mass. Inv. Trust | Investors Stock | Lehman | Tri-Cont. | Dow | Limited Partners |
| 1957 | -12.0% | -12.4% | -11.4% | -2.4% | -8.4% | 9.3% |
| 1957-58 | 26.8% | 29.3% | 24.7% | 30.0% | 26.9% | 44.5% |
| 1957-59 | 37.2% | 42.6% | 34.8% | 40.9% | 52.2% | 74.7% |
| 1957-60 | 36.0% | 42.5% | 38.3% | 44.8% | 42.6% | 107.2% |
Massachusetts Investors Trust has net assets of about \$1.8 billion; Investors Stock Fund about \$1 billion; Tri -Continental Corporation about \$ .5 billion; and Lehman Corporation about \$350 million; or a total of over \$3.5 billion.
I do not present the above tabulations and information with the idea of indicting investment companies. My own record of investing such huge sums of money, with restrictions on the degree of activity I might take in companies where we had investments, would be no better, if as good. I present this data to indicate the Dow as an investment competitor is no pushover, and the great bulk of investment funds in the country are going to have difficulty in bettering, or perhaps even matching, its performance.
Our portfolio is very different from that of the Dow. Our method of operation is substantially different from that of mutual funds.
However, most partners, as all alternative to their investment in the partnership, would probably have their funds invested in a media producing results comparable to the Dow, therefore, I feel it is a fair test of performance.
Our Method of Operation
Our avenues of investment break down into three categories. These categories have different behavior characteristics, and the way our money is divided among them will have an important effect on our results, relative to the Dow in any given year. The actual percentage division among categories is to some degree planned, but to a great extent, accidental, based upon availability factors.
The first section consists of generally undervalued securities (hereinafter called "generals") where we have nothing to say about corporate policies and no timetable as to when the undervaluation may correct itself. Over the years, this has been our largest category of investment, and more money has been made here than in either of the other categories. We usually have fairly large positions (5% to 10% of our total assets) in each of five or six generals, with smaller positions in another ten or fifteen.
Sometimes these work out very fast; many times they take years. It is difficult at the time of purchase to know any specific reason why they should appreciate in price. However, because of this lack of glamour or anything pending which might create immediate favorable market action, they are available at very cheap prices. A lot of value can be obtained for the price paid. This substantial excess of value creates a comfortable margin of safety in each transaction. This individual margin of safety, coupled with a diversity of commitments creates a most attractive package of safety and appreciation potential. Over the years our timing of purchases has been considerably better than our timing of sales. We do not go into these generals with the idea of getting the last nickel, but are usually quite content selling out at some intermediate level between our purchase price and what we regard as fair value to a private owner.
The generals tend to behave market-wise very much in sympathy with the Dow. Just because something is cheap does not mean it is not going to go down. During abrupt downward movements in the market, this segment may very well go down percentage-wise just as much as the Dow. Over a period of years, I believe the generals will outperform the Dow, and during sharply advancing years like 1961, this is the section of our portfolio that turns in the best results. It is, of course, also the most vulnerable in a declining market.
Our second category consists of “work-outs.” These are securities whose financial results depend on corporate action rather than supply and demand factors created by buyers and sellers of securities. In other words, they are securities with a timetable where we can predict, within reasonable error limits, when we will get how much and what might upset the applecart. Corporate events such as mergers, liquidations, reorganizations, spin-offs, etc., lead to work-outs. An important source in recent years has been sell-outs by oil producers to major integrated oil companies.
This category will produce reasonably stable earnings from year to year, to a large extent irrespective of the course of the Dow. Obviously, if we operate throughout a year with a large portion of our portfolio in workouts, we will look extremely good if it turns out to be a declining year for the Dow or quite bad if it is a strongly advancing year. Over the years, work-outs have provided our second largest category. At any given time, we may be in ten to fifteen of these; some just beginning and others in the late stage of their development. I believe in using borrowed money to offset a portion of our work-out portfolio since there is a high degree of safety in this category in terms of both eventual results and intermediate market behavior. Results, excluding the benefits derived from the use of borrowed money, usually fall in the 10% to 20% range. My self-imposed limit regarding borrowing is 25% of partnership net worth. Oftentimes we owe no money and when we do borrow, it is only as an offset against work-outs.
The final category is "control" situations where we either control the company or take a very large position and attempt to influence policies of the company. Such operations should definitely be measured on the basis of several years. In a given year, they may produce nothing as it is usually to our advantage to have the stock be stagnant market-wise for a long period while we are acquiring it. These situations, too, have relatively little in common with the behavior of the Dow. Sometimes, of course, we buy into a general with the thought in mind that it might develop into a control situation. If the price remains low enough for a long period, this might very well happen. If it moves up before we have a substantial percentage of the company's stock, we sell at higher levels and complete a successful general operation. We are presently acquiring stock in what may turn out to be control situations several years hence.
We are presently involved in the control of Dempster Mill Manufacturing Company of Beatrice, Nebraska. Our first stock was purchased as a generally undervalued security five years ago. A block later became available, and I went on the Board about four years ago. In August 1961, we obtained majority control, which is indicative of the fact that many of our operations are not exactly of the "overnight" variety.
Presently we own 70% of the stock of Dempster with another 10% held by a few associates. With only 150 or so other stockholders, a market on the stock is virtually non-existent, and in any case, would have no meaning for a controlling block. Our own actions in such a market could drastically affect the quoted price.
Therefore, it is necessary for me to estimate the value at yearend of our controlling interest. This is of particular importance since, in effect, new partners are buying in based upon this price, and old partners are selling a portion of their interest based upon the same price. The estimated value should not be what we hope it would be worth, or what it might be worth to an eager buyer, etc., but what I would estimate our interest would bring if sold under current conditions in a reasonably short period of time. Our efforts will be devoted toward increasing this value, and we feel there are decent prospects of doing this.
Dempster is a manufacturer of farm implements and water systems with sales in 1961 of about \$9 million. Operations have produced only nominal profits in relation to invested capital during recent years. This reflected a poor management situation, along with a fairly tough industry situation. Presently, consolidated net worth (book value) is about \$4.5 million, or \$75 per share, consolidated working capital about \$50 per share, and at yearend we valued our interest at \$35 per share. While I claim no oracular vision in a matter such as this, I feel this is a fair valuation to both new and old partners. Certainly, if even moderate earning power can be restored, a higher valuation will be justified, and even if it cannot, Dempster should work out at a higher figure. Our controlling interest was acquired at an average price of about \$28, and this holding currently represents 21% of partnership net assets based on the \$35 value.
Of course, this section of our portfolio is not going to be worth more money merely because General Motors, U.S. Steel, etc., sell higher. In a raging bull market, operations in control situations will seem like a very difficult way to make money, compared to just buying the general market. However, I am more conscious of the dangers presented at current market levels than the opportunities. Control situations, along with work-outs, provide a means of insulating a portion of our portfolio from these dangers.
The Question of Conservatism
The above description of our various areas of operation may provide some clues as to how conservatively our portfolio is invested. Many people some years back thought they were behaving in the most conservative manner by purchasing medium or long-term municipal or government bonds. This policy has produced substantial market depreciation in many cases, and most certainly has failed to maintain or increase real buying power.
Conscious, perhaps overly conscious, of inflation, many people now feel that they are behaving in a conservative manner by buying blue chip securities almost regardless of price-earnings ratios, dividend yields, etc. Without the benefit of hindsight as ill the bond example, I feel this course of action is fraught with danger. There is nothing at all conservative, in my opinion, about speculating as to just how high a multiplier a greedy and capricious public will put on earnings.
You will not be right simply because a large number of people momentarily agree with you. You will not be right simply because important people agree with you. In many quarters the simultaneous occurrence of the two above factors is enough to make a course of action meet the test of conservatism.
You will be right, over the course of many transactions, if your hypotheses are correct, your facts are correct, and your reasoning is correct. True conservatism is only possible through knowledge and reason.
I might add that in no way does the fact that our portfolio is not conventional prove that we are more conservative or less conservative than standard methods of investing. This can only be determined by examining the methods or examining the results.
I feel the most objective test as to just how conservative our manner of investing is arises through evaluation of performance in down markets. Preferably these should involve a substantial decline in the Dow. Our performance in the rather mild declines of 1957 and 1960 would confirm my hypothesis that we invest in an extremely conservative manner. I would welcome any partner’s suggesting objective tests as to conservatism to see how we stack up. We have never suffered a realized loss of more than 0.5% of 1% of total net assets, and our ratio of total dollars of realized gains to total realized losses is something like 100 to 1. Of course; this reflects the fact that on balance we have been operating in an up market. However, there have been many opportunities for loss transactions even in markets such as these (you may have found out about a few of these yourselves) so I think the above facts have some significance.
The Question of Size
Aside from the question as to what happens upon my death (which with a metaphysical twist, is a subject of keen interest to me), I am probably asked most often: "What affect is the rapid growth of partnership funds going to have upon performance?”
Larger funds tug in two directions. From the standpoint of "passive" investments, where we do not attempt by the size of our investment to influence corporate policies, larger sums hurt results. For the mutual fund or trust department investing in securities with very broad markets, the effect of large sums should be to penalize results only very slightly. Buying 10,000 shares of General Motors is only slightly more costly (on the basis of mathematical expectancy) than buying 1,000 or 100 shares.
In some of the securities in which we deal (but not all by any means) buying 10,000 shares is much more difficult than buying 100 and is sometimes impossible. Therefore, for a portion of our portfolio, larger sums are definitely disadvantageous. For a larger portion of the portfolio, I would say increased sums are only slightly disadvantageous. This category includes most of our work-outs and some generals.
However, in the case of control situations increased funds are a definite advantage. A "Sanborn Map" cannot be accomplished without the wherewithal. My definite belief is that the opportunities increase in this field as the funds increase. This is due to the sharp fall-off in competition as the ante mounts plus the important positive correlation that exists between increased size of company and lack of concentrated ownership of that company's stock.
Which is more important -- the decreasing prospects of profitability in passive investments or the increasing prospects in control investments? I can't give a definite answer to this since to a great extent it depends on the type of market in which we are operating. My present opinion is that there is no reason to think these should not be offsetting factors; if my opinion should change, you will be told. I can say, most assuredly, that our results in 1960 and 1961 would not have been better if we had been operating with the much smaller sums of 1956 and 1957.
And a Prediction
Regular readers (I may be flattering myself) will feel I have left the tracks when I start talking about predictions. This is one thing from which I have always shied away and I still do in the normal sense.
I am certainly not going to predict what general business or the stock market are going to do in the next year or two since I don't have the faintest idea.
I think you can be quite sure that over the next ten years there are going to be a few years when the general market is plus 20% or 25%, a few when it is minus on the same order, and a majority when it is in between. I haven't any notion as to the sequence in which these will occur, nor do I think it is of any great importance for the long-term investor.
Over any long period of years, I think it likely that the Dow will probably produce something like 5% to 7% per year compounded from a combination of dividends and market value gain. Despite the experience of recent years, anyone expecting substantially better than that from the general market probably faces disappointment.
Our job is to pile up yearly advantages over the performance of the Dow without worrying too much about whether the absolute results in a given year are a plus or a minus. I would consider a year in which we were down 15% and the Dow declined 25% to be much superior to a year when both the partnership and the Dow advanced 20%. I have stressed this point in talking with partners and have watched them nod their heads with varying degrees of enthusiasm. It is most important to me that you fully understand my reasoning in this regard and agree with me not only in your cerebral regions, but also down in the pit of your stomach.
For the reasons outlined in my method of operation, our best years relative to the Dow are likely to be in declining or static markets. Therefore, the advantage we seek will probably come in sharply varying amounts. There are bound to be years when we are surpassed by the Dow, but if over a long period we can average ten percentage points per year better than it, I will feel the results have been satisfactory.
Specifically, if the market should be down 35% or 40% in a year (and I feel this has a high probability of occurring one year in the next ten--no one knows which one), we should be down only 15% or 20%. If it is more or less unchanged during the year, we would hope to be up about ten percentage points. If it is up 20% or more, we would struggle to be up as much. The consequence of performance such as this over a period of years would mean that if the Dow produces a 5% to 7% per year overall gain compounded, I would hope our results might be 15% to 17% per year.
The above expectations may sound somewhat rash, and there is no question but that they may appear very much so when viewed from the vantage point of 1965 or 1970. It may turn out that I am completely wrong. However, I feel the partners are certainly entitled to know what I am thinking in this regard even though the nature of the business is such as to introduce a high probability of error in such expectations. In anyone year, the variations may be quite substantial. This happened in 1961, but fortunately the variation was on the pleasant side. They won't all be!
Miscellaneous
We are now installed in an office at 810 Kiewit Plaza with a first-class secretary, Beth Henley, and an associate with considerable experience in my type of securities, Bill Scott. My father is sharing office space with us (he also shares the expenses) and doing a brokerage business in securities. None of our brokerage is done through him so we have no "vicuna coat" situation.
Overall, I expect our overhead, excluding interest on borrowings and Nebraska Intangibles Tax, to run less than 0.5 of 1% of net assets. We should get our money's worth from this expenditure, and you are most cordially invited to drop in and see how the money is being spent.
With over 90 partners and probably 40 or so securities, you can understand that it is quite a welcome relief to me to shake loose from some of the details.
We presently have partners residing in locations from California to Vermont, and net assets at the beginning of 1962 amounted to \$ 7,178,500.00. Susie and I have an interest in the partnership amounting to \$1,025,000.00, and other relatives of mine have a combined interest totaling \$782,600.00. The minimum for new partners last year was \$25,000, but I am giving some thought to increasing it this year.
Peat, Marwick, Mitchell & Company did an excellent job of expediting the audit, providing tax figures much earlier than in the past. They assure me this performance can be continued.
Let me hear from you regarding questions you may have on any aspects of this letter, your audit, status of your partnership interest, etc. that may puzzle you.
Cordially Warren E. Buffett.
APPENDIX
Partnerships Operating Throughout 1961
| Partnership | 1/1/61 Capital at Market | Overall Gain in 1961* | Percentage Gain |
| Buffett Associates | 486,874.27 | 225,387.80 | 46.3% |
| Buffett Fund | 351,839.29 | 159,696.93 | 45.4% |
| Dacee | 235,480.31 | 116,504.47 | 49.5% |
| Emdee | 140,005.24 | 67,387.28 | 48.1% |
| Glenoff | 78,482.70 | 39,693.80 | 50.5% |
| Mo-Buff | 325,844.71 | 149,163.71 | 45.8% |
| Underwood | 582,256.82 | 251,951.26 | 43.3% |
| 2,200,783.34 | 1,009,785.25 | 45.9% |
Partnerships Started in 1961
| Partnership | Paid-in | Overall Gain in 1961 | Percentage Gain |
| Ann Investments | 100,100 (1-30-61) | 35,367.93 | 35.3% |
| Buffett-TD | 250,100 ($200,100 on 3-8-61, $50,000 on 5-31-61) | 70,294.08 | 28.1% |
| Buffett-Holland | 125,100 (5-17-61) | 16,703.76 | 13.3% |
* Gain in net assets at market values plus payments to limited partners during year.
1961年致合伙人信 巴菲特合伙企业有限公司 基威特广场810号 内布拉斯加州奥马哈31
1962年1月24日
1961年业绩
我一直告诉合伙人，我的期望和希望（这两者常常难以区分）是：在下跌或横盘市场中，我们的表现会相对优于大盘；但在上涨市场中，我们的表现可能就没那么亮眼了。在强势上涨行情中，我预计自己将很难跟上大盘的步伐。
尽管1961年对大盘来说是个好年头，而且对我们而言，无论是绝对收益还是相对收益也都是非常出色的一年，但上一段所说的预期仍然保持不变。
1961年期间，以道琼斯工业平均指数（以下简称“道指”）衡量的大盘，总涨幅为22.2%（包含持有道指成分股所获的股息）。所有全年运营的合伙企业，在扣除运营费用后、但在向有限合伙人分配或向普通合伙人计提收益之前，平均回报率为45.9%。各合伙企业的具体收益详情见附录，同时附录中也列示了年内新成立的合伙企业的业绩。
目前，我们已经完成了五个完整的合伙企业运营年度，这五年的业绩按年度和累计（即复利）方式列示如下。这些业绩数据按上一段所述口径计算：扣除费用后，但在合伙人之间分配收益或向合伙人支付之前。
| 年份 | 全年运营的合伙企业数 | 合伙企业收益率 | 道指收益率* |
| 1957 | 3 | 10.4% | -8.4% |
| 1958 | 5 | 40.9% | 38.5% |
| 1959 | 6 | 25.9% | 19.9% |
| 1960 | 7 | 22.8% | -6.3% |
| 1961 | 7 | 45.9% | 22.2% |
* 包含持有道指成分股所获的股息。
按复利计算，累计业绩如下：
| 年份 | 合伙企业收益率 | 道指收益率 |
| 1957 | 10.4% | -8.4% |
| 1957-58 | 55.6% | 26.9% |
| 1957-59 | 95.9% | 52.2% |
| 1957-60 | 140.6% | 42.6% |
| 1957-61 | 251.0% | 74.3% |
这些数据并不衡量有限合伙人的实际收益——当然，那才是你最关心的数字。由于过去存在多种不同的合伙协议安排，我认为用合伙企业的总体净收益率（基于年初和年末的市场价值）作为衡量整体表现最公平的标尺。
如果按照我们现行巴菲特合伙企业有限公司的收益分配协议进行模拟调整，结果如下：
| 年份 | 有限合伙人收益率 | 道指收益率 |
| 1957 | 9.3% | -8.4% |
| 1958 | 32.2% | 38.5% |
| 1959 | 20.9% | 19.9% |
| 1960 | 18.6% | -6.3% |
| 1961 | 35.9% | 22.2% |
| （复利） | ||
| 1957 | 9.3% | -8.4% |
| 1957-58 | 44.5% | 26.9% |
| 1957-59 | 74.7% | 52.2% |
| 1957-60 | 107.2% | 42.6% |
| 1957-61 | 181.6% | 74.3% |
关于比较基准
在我选择合伙人以及随后的合作中，最重要的一件事就是确保我们使用同一把标尺。如果我的业绩糟糕，我期望合伙人会撤资——事实上，我自己也该为自有资金寻找新的投资渠道了。如果业绩不错，那我自然过得很好，这种状态我肯定能适应。
问题在于，我们必须对“好”和“差”有相同的定义。我主张在行动之前就设定标尺；事后来看，几乎任何事情都可以通过与某个参照物的比较而显得不错。
我一直用道琼斯工业平均指数作为我们的比较基准。我认为三年是对业绩最最起码的考验周期，而检验业绩的最佳方式，是经历一个至少长达三年的时期，且道指在该时期的终点水平与起点水平大致相当。
虽然道指作为业绩衡量标准并不完美（其实也没有什么是完美的），但它的优势在于广为人知、具有长期连续性，并且能较为准确地反映一般投资者在市场上的整体体验。我不反对使用其他衡量大盘表现的方法，比如其它股市平均指数、领先的多元化共同基金、银行普通信托基金等。
你可能会觉得我设定了一个过于简单的标尺，因为跑赢一个由30只主要蓝筹股组成的被动指数似乎很容易。但实际上，这个指数历来是一个相当难缠的对手。Arthur Wiesenberger（阿瑟·威森伯格）关于投资公司的经典著作列出了1946-1960年这15年间所有主要共同基金的业绩。目前投入共同基金的资金超过200亿美元，因此这些基金的集体经验代表了数百万投资者的集体经验。尽管我拿不到确切的数字，但我相信，大多数领先投资顾问机构和银行信托部门的投资组合，其业绩与这些共同基金相仿。
Wiesenberger在其《图表与统计》中列出了70只自1946年以来有持续记录的共同基金。我排除了其中32只基金，原因各异：它们要么是平衡型基金（因此并未充分参与大盘的上涨），要么是特定行业基金等。我排除这32只基金，是因为我觉得比较起来不公平——其中31只的业绩比道指还差，所以肯定不是为了给下面的结论添彩。
在剩下的38只共同基金中，其运作方式在我看来与道指的比较是合理的，其中32只跑输了道指，仅有6只跑赢了。截至1960年底，那6只表现更优的基金总资产约为10亿美元，而32只表现更差的基金总资产约为65亿美元。那6只表现优异的基金，没有一只每年的业绩能超出道指几个百分点以上。
下面我列出我们运营期间（不包括1961年，因为没有确切数据，不过粗略数字显示与1957-1960年情况一致）两只最大的普通股开放式投资公司（共同基金）和两只最大的封闭式投资公司的逐年业绩：
| 年份 | Mass. Inv. Trust | Investors Stock | Lehman | Tri-Cont. | 道指 | 有限合伙人 |
| 1957 | -12.0% | -12.4% | -11.4% | -2.4% | -8.4% | 9.3% |
| 1958 | 44.1% | 47.6% | 40.8% | 33.2% | 38.5% | 32.2% |
| 1959 | 8.2% | 10.3% | 8.1% | 8.4% | 19.9% | 20.9% |
| 1960 | -0.9% | -0.1% | 2.6% | 2.8% | -6.3% | 18.6% |
（数据来源：1961年穆迪银行与金融手册）
（复利）
| 年份 | Mass. Inv. Trust | Investors Stock | Lehman | Tri-Cont. | 道指 | 有限合伙人 |
| 1957 | -12.0% | -12.4% | -11.4% | -2.4% | -8.4% | 9.3% |
| 1957-58 | 26.8% | 29.3% | 24.7% | 30.0% | 26.9% | 44.5% |
| 1957-59 | 37.2% | 42.6% | 34.8% | 40.9% | 52.2% | 74.7% |
| 1957-60 | 36.0% | 42.5% | 38.3% | 44.8% | 42.6% | 107.2% |
Massachusetts Investors Trust（马萨诸塞投资者信托）净资产约18亿美元；Investors Stock Fund（投资者股票基金）约10亿美元；Tri-Continental Corporation（三大陆公司）约5亿美元；Lehman Corporation（雷曼公司）约3.5亿美元；合计超过35亿美元。
我列出上述表格和信息，并不是想指责投资公司。如果我管理如此巨额的资产，并且在所投资公司活动方面受到限制，我的记录未必会更好，甚至可能更差。我提供这些数据是为了说明，道指作为投资竞争对手绝非等闲之辈，国内绝大多数投资基金想要超越、甚至哪怕是追上它的表现，都将十分困难。
我们的投资组合与道指截然不同。我们的操作方法也与共同基金大相径庭。
然而，大多数合伙人如果不投资我们的合伙企业，其资金很可能投入了能产生与道指相当回报的媒介中，因此我认为道指是衡量我们业绩的公平标尺。
我们的操作方法
我们的投资渠道分为三大类。每一类都有不同的行为特征，而资金在这几类之间的分配比例，将在任何一个特定年份对我们的业绩（相对于道指）产生重要影响。各类别的实际百分比分配在某种程度上是有计划的，但在很大程度上又是偶然的，取决于机会的存在与否。
第一类包含被普遍低估的证券（以下简称“低估类投资”）。在这类投资中，我们对公司政策没有发言权，也无法预知低估何时会得到纠正。多年来，这是我们最大的投资类别，赚到的钱也比其他两类都多。我们通常在每个低估类标的中持有相当大的仓位（占总资产的5%到10%），另外在十到十五个标的持有较小的仓位。
有时候这些投资很快就能见效；很多时候则需要数年。在买入时，很难知道它们为什么应该上涨的具体原因。然而，正因为缺乏吸引力或缺乏可能立即引发有利市场行动的催化剂，它们才能以极低的价格买到。用支付的价格可以获得大量价值。这种超额的巨大价值为每笔交易创造了舒适的安全边际。这种个体安全边际，加上多元化的承诺，构成了一个极具吸引力的安全与增值潜力组合。多年来，我们在买入时机的把握上远好于卖出时机。我们进入这些低估类标的，并非为了赚到最后一分钱，而是通常乐于在买入价与我们认为对私人所有者而言的公允价值之间的某个中间水平卖出。
低估类投资的市场行为往往与道指高度同步。仅仅因为某只股票便宜，并不意味着它不会下跌。在市场急剧下跌期间，这部分仓位可能百分比跌幅与道指一样大。但经过多年，我相信低估类标的表现将超越道指。在像1961年这样大幅上涨的年份里，这部分仓位会带来最好的业绩。当然，它也是在下跌市场中最为脆弱的部分。
第二类是“套利类投资”。这类证券的财务结果取决于公司行动，而非证券买卖双方的供需因素。换句话说，它们是有明确时间表的证券——我们可以在合理的误差范围内预测何时会得到多少钱，以及什么可能会破坏计划。公司事件如并购、清算、重组、分拆等，都会带来套利机会。近年来一个重要的来源是石油生产商向大型一体化石油公司的出售行为。
这类投资每年会产生相当稳定的收益，在很大程度上与道指的走势无关。显然，如果我们在一年中大部分仓位都投入套利类投资，那么这一年在道指下跌时我们会显得极好，而在道指大幅上涨时则会显得相当糟糕。多年来，套利类投资一直是我们的第二大类别。在任何时候，我们可能参与十到十五个套利项目，有些刚刚开始，有些则已进入后期。我认为使用借入资金来对冲一部分套利类仓位是合理的，因为这类投资在最终结果和中间市场行为方面都有高度的安全性。扣除使用借入资金带来的好处后，此类投资的收益通常在10%到20%之间。我给自己设定的借款上限是合伙企业净资产的25%。很多时候我们根本不借钱，而当我们借钱时，也仅仅是为了对冲套利类仓位。
最后一类是“控制类投资”——我们要么控制公司，要么持有非常大的仓位并试图影响公司政策。这类操作显然应该以几年为单位来衡量。在某个特定年份，它们可能一无所获，因为通常对我们有利的做法是让股票在很长一段时间内市场走势停滞，以便我们持续买入。这些情况也与道指的行为关系不大。当然，有时我们买入低估类标的时，也抱有它可能演变成控制类标的的念头。如果价格长期低迷，这种情况就很可能发生。如果在持有相当大比例的公司股份之前股价上涨了，我们就会在更高的价位卖出，完成一次成功的低估类操作。目前我们正在收购一些股票，这些股票可能在几年后演变成控制类投资。
我们目前正在控制内布拉斯加州比阿特丽斯的邓普斯特农机制造公司（Dempster Mill Manufacturing Company）。我们最早是在五年前作为低估类证券买入的。后来出现了一笔大宗股份，大约四年前我进入了董事会。1961年8月，我们获得了多数控股权——这说明我们的许多操作并非“一夜之间”就能完成的。
目前我们持有邓普斯特70%的股份，另外10%由几位合伙人持有。由于只有大约150名其他股东，该股票几乎不存在市场交易，无论如何，对于一个控股股东来说，市场价格也毫无意义。我们自己在这样一个市场上的行动很可能严重影响报价。
因此，我需要估算我们控股权益在年末的价值。这一点尤其重要，因为实际上，新合伙人正是基于这个价格买入，而老合伙人也基于同样价格卖出他们的一部分权益。这个估算价值不应该是我们希望它能值多少，或者它对于一个急切买家可能值多少等等，而是我估算的，在当前条件下，如果我们在一段合理的时间内将其出售，我们的权益能卖多少钱。我们将致力于提高这个价值，并且我们认为实现这一目标存在合理的前景。
邓普斯特是一家农具和给水系统制造商，1961年销售额约为900万美元。近年来，与投入资本相比，其经营利润微乎其微。这反映了管理层不力以及相当严峻的行业状况。目前，综合净资产（账面价值）约为450万美元，即每股75美元；综合营运资本约为每股50美元。年末我们将该权益估值定为每股35美元。虽然我不声称对此类事情有先见之明，但我认为这是对新老合伙人都公平的估值。当然，如果能恢复哪怕是一般的盈利能力，更高的估值就是合理的；即便不能，邓普斯特最终也应该以更高的价格解决。我们取得控股权的平均价格约为每股28美元，基于每股35美元的价值，这部分持股目前占合伙企业净资产的21%。
当然，这部分投资组合并不会仅仅因为通用汽车、美国钢铁等公司股价上涨而升值。在狂热的牛市中，与仅仅买入大盘相比，控制类操作似乎是一种非常艰难的赚钱方式。然而，我更关注当前市场水平带来的风险，而非机会。控制类投资和套利类投资一样，为我们的部分投资组合提供了一种抵御这些风险的手段。
关于保守性
以上对我们各个操作领域的描述，或许能让你对我们投资组合的保守程度有所了解。多年前，许多人认为自己购买中长期市政债券或政府债券是最保守的做法。但这一政策在多数情况下导致了市场价值的重大贬值，而且几乎肯定未能维持或增加实际购买力。
由于对通胀有所意识（或许过度敏感），现在很多人认为购买蓝筹股是保守的做法，几乎不考虑市盈率、股息率等因素。但在没有像债券例子那样的事后诸葛亮的情况下，我认为这种做法充满危险。在我看来，猜测一个贪婪而善变的公众会将市盈率推高到何等程度，这根本不保守。
你正确，并不是因为人数众多一时同意你；你正确，也并不是因为重要人物同意你。在很多地方，上述两个因素同时出现就足以让某种行为方式符合保守主义的检验标准。
但经过多次交易，如果你的假设正确、事实正确、推理正确，你最终就是正确的。真正的保守只能通过知识和理性才能实现。
我还要补充一点：我们的投资组合不合常规，这绝不意味着我们比标准投资方法更保守或更不保守。这只能通过审视方法或审视结果来判断。
我认为检验我们投资方式保守与否最客观的测试，就是看我们在下跌市场中的表现。最好是道指出现大幅下跌。我们在1957年和1960年两次温和下跌中的表现，证实了我的假设：我们的投资方式极其保守。我欢迎任何合伙人提出关于保守性的客观测试，看看我们的表现如何。我们从未实现过超过总净资产0.5%之0.5%（即万分之二点五）的已实现亏损，而已实现总收益与已实现总亏损的比率大约为100比1。当然，这反映了我们总体上是在上涨市场中运作。但即使在如此市场环境下，也存在很多造成亏损交易的机会（你们自己可能就遇到过一些），所以我认为上述事实具有一定的意义。
关于规模
除了我死后会发生什么（这个带点玄学色彩的问题，我自己也极感兴趣）之外，被问得最多的问题大概是：“合伙基金资产的快速增长对业绩会有什么影响？”
基金规模大，会产生两个方向的影响。对于“被动”投资——我们不试图通过投资规模影响公司政策——来说，规模越大越不利于业绩。对于投资于流动性非常强的证券的共同基金或信托部门来说，大额资金的影响应该只会轻微损害业绩。买入10,000股通用汽车，相比于买入1,000股或100股，其成本（基于数学期望）只有很小的增加。
在我们涉足的部分证券（绝非全部）中，买入10,000股远比买入100股困难得多，有时甚至不可能。因此，对于投资组合的一部分来说，规模越大绝对是劣势。对于投资组合的另一大部分，我认为规模增大只有略微不利的影响。这部分包括我们大多数的套利类投资和一些低估类投资。
然而，对于控制类投资来说，资金增加则是一个明确的优势。没有足够的资金，像“桑伯恩地图”（Sanborn Map）这样的机会是无法实现的。我明确认为，随着资金增加，这一领域的机遇也在增长。这是因为随着赌注的升高，竞争急剧减少，而且公司规模增大与该公司股权集中度低之间存在重要的正相关关系。
哪个更重要？——被动投资盈利前景的下降，还是控制类投资机会的增加？我无法给出明确答案，因为这在很大程度上取决于我们运作的市场类型。我目前的观点是，没有理由认为这两者不能相互抵消；如果我的看法改变，我会告诉你们。我可以非常肯定地说，如果我们运作的资金像1956年和1957年那么小，我们在1960年和1961年的业绩不会更好。
然后是一个预测
老读者（或许是我自恋了）会觉得我开始预测时就要偏离正轨了。预测是我一直回避的东西，而且在通常情况下我仍然回避。
我当然不会预测未来一两年总体商业或股市会怎样，因为我毫无头绪。
但我认为你可以相当确信，在未来的十年中，会有几年大盘上涨20%或25%，有几年下跌同样的幅度，而大部分年份则处于中间状态。我不知道这些年份会以怎样的顺序出现，而且我认为对于长期投资者来说，这也不太重要。
在任何长期段内，我倾向于认为道指很可能从股息和市场价值增长中获得每年大约5%到7%的复利。尽管近年来的经验如此，但任何期望从这个市场获得远超此数的人，恐怕都将面临失望。
我们的任务是在每一年创造相对于道指的优势，而不必过分担心特定年份的绝对结果是正是负。我会认为，一年中我们下跌15%而道指下跌25%，远胜于合伙基金和道指都上涨20%的一年。我在与合伙人交谈时强调过这一点，看着他们以不同程度的热情点头。让我非常重要的是，你们不仅要在大脑中完全理解我这个推理，并且从心底里同意我。
根据我在操作方法中概述的原因，我们相对于道指的最佳年份很可能出现在下跌或横盘市场中。因此，我们寻求的优势可能会以剧烈变化的幅度出现。肯定会有一些年份我们被道指超越，但如果长期来看，我们平均每年能比道指高出十个百分点，我就会觉得结果是令人满意的。
具体来说，如果某年市场下跌35%或40%（我认为未来十年中有一年发生这种情况的概率很高——但没人知道是哪一年），我们应该只下跌15%或20%。如果当年市场基本持平，我们希望上涨大约十个百分点。如果市场上涨20%或更多，我们会努力争取获得同样的涨幅。多年下来，这样的业绩意味着：如果道指实现每年5%到7%的整体复利增长，我希望我们的业绩能达到每年15%到17%。
上述预期听起来可能有些大胆，毫无疑问，从1965年或1970年的角度来看，这些预期可能会显得非常大胆。结果可能证明我完全错了。然而，我认为合伙人当然有权知道我是怎么想的——尽管这种业务的性质决定了此类预期出现错误的概率很高。在任何一年，偏差都可能相当大。1961年就发生了偏差，幸运的是偏差是令人愉快的方向。但不会年年都这样！
杂项
我们现在搬进了基威特广场810号的新办公室，配备了一位一流秘书Beth Henley（贝丝·亨利），还有一位在我的证券类型上经验丰富的合伙人Bill Scott（比尔·斯科特）。我父亲和我们共用办公室（他也分担费用），并从事证券经纪业务。我们的任何经纪业务都不通过他做，所以没有“羊驼绒大衣”的情况。
总体而言，我预计我们的间接费用（不包括借款利息和内布拉斯加州无形资产税）将少于净资产的0.5%之1%（即万分之五）。这笔花费应该物有所值，最诚挚地邀请你们随时来参观，看看钱是怎么花的。
现在有超过90位合伙人，大约40只证券，你们可以理解，能摆脱一些细节对我来说是多么大的解脱。
目前我们的合伙人居住地从加利福尼亚到佛蒙特州都有，1962年初的净资产为7,178,500美元。苏茜和我拥有合伙基金权益1,025,000美元，我的其他亲属合计拥有782,600美元。去年新合伙人的最低投资额是25,000美元，但我正在考虑今年提高这个数字。
Peat, Marwick, Mitchell & Company（毕马威会计师事务所）在加快审计方面做得非常出色，提供税务数据的时间比以往早得多。他们向我保证这种表现可以持续。
如果你们对这封信、你们的审计报告、合伙权益状况等任何方面有疑问，请随时与我联系。
真诚的，
Warren E. Buffett（沃伦·E·巴菲特）
附录
1961年全年运营的合伙企业
| 合伙企业 | 1961年1月1日按市值计的资本 | 1961年总体收益* | 收益率百分比 |
| Buffett Associates | 486,874.27 | 225,387.80 | 46.3% |
| Buffett Fund | 351,839.29 | 159,696.93 | 45.4% |
| Dacee | 235,480.31 | 116,504.47 | 49.5% |
| Emdee | 140,005.24 | 67,387.28 | 48.1% |
| Glenoff | 78,482.70 | 39,693.80 | 50.5% |
| Mo-Buff | 325,844.71 | 149,163.71 | 45.8% |
| Underwood | 582,256.82 | 251,951.26 | 43.3% |
| 合计 | 2,200,783.34 | 1,009,785.25 | 45.9% |
1961年新成立的合伙企业
| 合伙企业 | 实缴资本 | 1961年总体收益 | 收益率百分比 |
| Ann Investments | 100,100（1961-1-30） | 35,367.93 | 35.3% |
| Buffett-TD | 250,100（1961-3-8缴200,100，1961-5-31缴50,000） | 70,294.08 | 28.1% |
| Buffett-Holland | 125,100（1961-5-17） | 16,703.76 | 13.3% |
* 按市值计算的净资产收益加上年内向有限合伙人支付的款项。