Berkshire's Performance vs. the S&P 500
| Year | Annual Percentage Change | ||
| in Per-Share Book Value of Berkshire | in Per-Share Market Value of Berkshire | in S&P 500 with Dividends Included | |
| 1965 | 23.8 | 49.5 | 10.0 |
| 1966 | 20.3 | (3.4) | (11.7) |
| 1967 | 11.0 | 13.3 | 30.9 |
| 1968 | 19.0 | 77.8 | 11.0 |
| 1969 | 16.2 | 19.4 | (8.4) |
| 1970 | 12.0 | (4.6) | 3.9 |
| 1971 | 16.4 | 80.5 | 14.6 |
| 1972 | 21.7 | 8.1 | 18.9 |
| 1973 | 4.7 | (2.5) | (14.8) |
| 1974 | 5.5 | (48.7) | (26.4) |
| 1975 | 21.9 | 2.5 | 37.2 |
| 1976 | 59.3 | 129.3 | 23.6 |
| 1977 | 31.9 | 46.8 | (7.4) |
| 1978 | 24.0 | 14.5 | 6.4 |
| 1979 | 35.7 | 102.5 | 18.2 |
| 1980 | 19.3 | 32.8 | 32.3 |
| 1981 | 31.4 | 31.8 | (5.0) |
| 1982 | 40.0 | 38.4 | 21.4 |
| 1983 | 32.3 | 69.0 | 22.4 |
| 1984 | 13.6 | (2.7) | 6.1 |
| 1985 | 48.2 | 93.7 | 31.6 |
| 1986 | 26.1 | 14.2 | 18.6 |
| 1987 | 19.5 | 4.6 | 5.1 |
| 1988 | 20.1 | 59.3 | 16.6 |
| 1989 | 44.4 | 84.6 | 31.7 |
| 1990 | 7.4 | (23.1) | (3.1) |
| 1991 | 39.6 | 35.6 | 30.5 |
| 1992 | 20.3 | 29.8 | 7.6 |
| 1993 | 14.3 | 38.9 | 10.1 |
| 1994 | 13.9 | 25.0 | 1.3 |
| 1995 | 43.1 | 57.4 | 37.6 |
| 1996 | 31.8 | 6.2 | 23.0 |
| 1997 | 34.1 | 34.9 | 33.4 |
| 1998 | 48.3 | 52.2 | 28.6 |
| 1999 | 0.5 | (19.9) | 21.0 |
| 2000 | 6.5 | 26.6 | (9.1) |
| 2001 | (6.2) | 6.5 | (11.9) |
| 2002 | 10.0 | (3.8) | (22.1) |
| 2003 | 21.0 | 15.8 | 28.7 |
| 2004 | 10.5 | 4.3 | 10.9 |
| 2005 | 6.4 | 0.8 | 4.9 |
| 2006 | 18.4 | 24.1 | 15.8 |
| 2007 | 11.0 | 28.7 | 5.5 |
| 2008 | (9.6) | (31.8) | (37.0) |
| 2009 | 19.8 | 2.7 | 26.5 |
| 2010 | 13.0 | 21.4 | 15.1 |
| 2011 | 4.6 | (4.7) | 2.1 |
| 2012 | 14.4 | 16.8 | 16.0 |
| 2013 | 18.2 | 32.7 | 32.4 |
| 2014 | 8.3 | 27.0 | 13.7 |
| 2015 | 6.4 | (12.5) | 1.4 |
| 2016 | 10.7 | 23.4 | 12.0 |
| 2017 | 23.0 | 21.9 | 21.8 |
| Compounded Annual Gain – 1965-2017 | 19.1% | 20.9% | 9.9% |
| Overall Gain – 1964-2017 | 1,088,029% | 2,404,748% | 15,508% |
Note: Data are for calendar years with these exceptions: 1965 and 1966, year ended 9/30; 1967, 15 months ended 12/31. Starting in 1979, accounting rules required insurance companies to value the equity securities they hold at market rather than at the lower of cost or market, which was previously the requirement. In this table, Berkshire's results through 1978 have been restated to conform to the changed rules. In all other respects, the results are calculated using the numbers originally reported. The S&P 500 numbers are pre-tax whereas the Berkshire numbers are after-tax. If a corporation such as Berkshire were simply to have owned the S&P 500 and accrued the appropriate taxes, its results would have lagged the S&P 500 in years when that index showed a positive return, but would have exceeded the S&P 500 in years when the index showed a negative return. Over the years, the tax costs would have caused the aggregate lag to be substantial.
BERKSHIRE HATHAWAY INC.
To the Shareholders of Berkshire Hathaway Inc.:
Berkshire’s gain in net worth during 2017 was \$65.3 billion, which increased the per-share book value of both our Class A and Class B stock by 23%. Over the last 53 years (that is, since present management took over), per-share book value has grown from \$19 to \$211,750, a rate of 19.1% compounded annually.*
The format of that opening paragraph has been standard for 30 years. But 2017 was far from standard: A large portion of our gain did not come from anything we accomplished at Berkshire.
The \$65 billion gain is nonetheless real – rest assured of that. But only \$36 billion came from Berkshire’s operations. The remaining \$29 billion was delivered to us in December when Congress rewrote the U.S. Tax Code. (Details of Berkshire’s tax-related gain appear on page K-32 and pages K-89 – K-90.)
After stating those fiscal facts, I would prefer to turn immediately to discussing Berkshire's operations. But, in still another interruption, I must first tell you about a new accounting rule – a generally accepted accounting principle (GAAP) – that in future quarterly and annual reports will severely distort Berkshire's net income figures and very often mislead commentators and investors.
The new rule says that the net change in unrealized investment gains and losses in stocks we hold must be included in all net income figures we report to you. That requirement will produce some truly wild and capricious swings in our GAAP bottom-line. Berkshire owns \$170 billion of marketable stocks (not including our shares of Kraft Heinz), and the value of these holdings can easily swing by \$10 billion or more within a quarterly reporting period. Including gyrations of that magnitude in reported net income will swamp the truly important numbers that describe our operating performance. For analytical purposes, Berkshire’s “bottom-line” will be useless.
The new rule compounds the communication problems we have long had in dealing with the realized gains (or losses) that accounting rules compel us to include in our net income. In past quarterly and annual press releases, we have regularly warned you not to pay attention to these realized gains, because they – just like our unrealized gains – fluctuate randomly.
That's largely because we sell securities when that seems the intelligent thing to do, not because we are trying to influence earnings in any way. As a result, we sometimes have reported substantial realized gains for a period when our portfolio, overall, performed poorly (or the converse).
With the new rule about unrealized gains exacerbating the distortion caused by the existing rules applying to realized gains, we will take pains every quarter to explain the adjustments you need in order to make sense of our numbers. But televised commentary on earnings releases is often instantaneous with their receipt, and newspaper headlines almost always focus on the year-over-year change in GAAP net income. Consequently, media reports sometimes highlight figures that unnecessarily frighten or encourage many readers or viewers.
We will attempt to alleviate this problem by continuing our practice of publishing financial reports late on Friday, well after the markets close, or early on Saturday morning. That will allow you maximum time for analysis and give investment professionals the opportunity to deliver informed commentary before markets open on Monday. Nevertheless, I expect considerable confusion among shareholders for whom accounting is a foreign language.
At Berkshire what counts most are increases in our normalized per-share earning power. That metric is what Charlie Munger, my long-time partner, and I focus on – and we hope that you do, too. Our scorecard for 2017 follows.
Acquisitions
There are four building blocks that add value to Berkshire: (1) sizable stand-alone acquisitions; (2) bolt-on acquisitions that fit with businesses we already own; (3) internal sales growth and margin improvement at our many and varied businesses; and (4) investment earnings from our huge portfolio of stocks and bonds. In this section, we will review 2017 acquisition activity.
In our search for new stand-alone businesses, the key qualities we seek are durable competitive strengths; able and high-grade management; good returns on the net tangible assets required to operate the business; opportunities for internal growth at attractive returns; and, finally, a sensible purchase price.
That last requirement proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all-time high. Indeed, price seemed almost irrelevant to an army of optimistic purchasers.
Why the purchasing frenzy? In part, it's because the CEO job self-selects for “can-do” types. If Wall Street analysts or board members urge that brand of CEO to consider possible acquisitions, it's a bit like telling your ripening teenager to be sure to have a normal sex life.
Once a CEO hungers for a deal, he or she will never lack for forecasts that justify the purchase. Subordinates will be cheering, envisioning enlarged domains and the compensation levels that typically increase with corporate size. Investment bankers, smelling huge fees, will be applauding as well. (Don't ask the barber whether you need a haircut.) If the historical performance of the target falls short of validating its acquisition, large “synergies” will be forecast. Spreadsheets never disappoint.
The ample availability of extraordinarily cheap debt in 2017 further fueled purchase activity. After all, even a high-priced deal will usually boost per-share earnings if it is debt-financed. At Berkshire, in contrast, we evaluate acquisitions on an all-equity basis, knowing that our taste for overall debt is very low and that to assign a large portion of our debt to any individual business would generally be fallacious (leaving aside certain exceptions, such as debt dedicated to Clayton's lending portfolio or to the fixed-asset commitments at our regulated utilities). We also never factor in, nor do we often find, synergies.
Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don't need. We held this view 50 years ago when we each ran an investment partnership, funded by a few friends and relatives who trusted us. We also hold it today after a million or so “partners” have joined us at Berkshire.
Despite our recent drought of acquisitions, Charlie and I believe that from time to time Berkshire will have opportunities to make very large purchases. In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.
* * * * * * * * * * * *
We were able to make one sensible stand-alone purchase last year, a 38.6% partnership interest in Pilot Flying J (“PFJ”). With about \$20 billion in annual volume, the company is far and away the nation’s leading travel-center operator.
PFJ has been run from the get-go by the remarkable Haslam family. “Big Jim” Haslam began with a dream and a gas station 60 years ago. Now his son, Jimmy, manages 27,000 associates at about 750 locations throughout North America. Berkshire has a contractual agreement to increase its partnership interest in PFJ to 80% in 2023; Haslam family members will then own the remaining 20%. Berkshire is delighted to be their partner.
When driving on the Interstate, drop in. PFJ sells gasoline as well as diesel fuel, and the food is good. If it's been a long day, remember, too, that our properties have 5,200 showers.
* * * * * * * * * * * *
Let's move now to bolt-on acquisitions. Some of these were small transactions that I will not detail. Here is an account, however, of a few larger purchases whose closings stretched between late 2016 and early 2018.
- Clayton Homes acquired two builders of conventional homes during 2017, a move that more than doubled our presence in a field we entered only three years ago. With these additions – Oakwood Homes in Colorado and Harris Doyle in Birmingham – I expect our 2018 site built volume will exceed \$1 billion.
Clayton's emphasis, nonetheless, remains manufactured homes, both their construction and their financing. In 2017 Clayton sold 19,168 units through its own retail operation and wholesaled another 26,706 units to independent retailers. All told, Clayton accounted for $49\%$ of the manufactured-home market last year. That industry-leading share – about three times what our nearest competitor did – is a far cry from the $13\%$ Clayton achieved in 2003, the year it joined Berkshire.
Both Clayton Homes and PFJ are based in Knoxville, where the Clayton and Haslam families have long been friends. Kevin Clayton's comments to the Haslams about the advantages of a Berkshire affiliation, and his admiring comments about the Haslam family to me, helped cement the PFJ deal.
- Near the end of 2016, Shaw Industries, our floor coverings business, acquired U.S. Floors (“USF”), a rapidly growing distributor of luxury vinyl tile. USF’s managers, Piet Dossche and Philippe Erramuzpe, came out of the gate fast, delivering a 40% increase in sales in 2017, during which their operation was integrated with Shaw’s. It’s clear that we acquired both great human assets and business assets in making the USF purchase.
Vance Bell, Shaw's CEO, originated, negotiated and completed this acquisition, which increased Shaw's sales to \$5.7 billion in 2017 and its employment to 22,000. With the purchase of USF, Shaw has substantially strengthened its position as an important and durable source of earnings for Berkshire.
- I have told you several times about HomeServices, our growing real estate brokerage operation. Berkshire backed into this business in 2000 when we acquired a majority interest in MidAmerican Energy (now named Berkshire Hathaway Energy). MidAmerican's activities were then largely in the electric utility field, and I originally paid little attention to HomeServices.
But, year-by-year, the company added brokers and, by the end of 2016, HomeServices was the second-largest brokerage operation in the country – still ranking, though, far behind the leader, Realogy. In 2017, however, HomeServices’ growth exploded. We acquired the industry’s third-largest operator, Long and Foster; number 12, Houlihan Lawrence; and Gloria Nilson.
With those purchases we added 12,300 agents, raising our total to 40,950. HomeServices is now close to leading the country in home sales, having participated (including our three acquisitions pro-forma) in \$127 billion of “sides” during 2017. To explain that term, there are two “sides” to every transaction; if we represent both buyer and seller, the dollar value of the transaction is counted twice.
Despite its recent acquisitions, HomeServices is on track to do only about $3\%$ of the country's home-brokerage business in 2018. That leaves $97\%$ to go. Given sensible prices, we will keep adding brokers in this most fundamental of businesses.
- Finally, Precision Castparts, a company built through acquisitions, bought Wilhelm Schulz GmbH, a German maker of corrosion resistant fittings, piping systems and components. Please allow me to skip a further explanation. I don’t understand manufacturing operations as well as I do the activities of real estate brokers, home builders or truck stops.
Fortunately, I don't need in this instance to bring knowledge to the table: Mark Donegan, CEO of Precision, is an extraordinary manufacturing executive, and any business in his domain is slated to do well. Betting on people can sometimes be more certain than betting on physical assets.
Let's now move on to operations, beginning with property-casualty (“p/c”) insurance, a business I do understand and the engine that for 51 years has powered Berkshire’s growth.
Insurance
Before I discuss our 2017 insurance results, let me remind you of how and why we entered the field. We began by purchasing National Indemnity and a smaller sister company for \$8.6 million in early 1967. With our purchase we received \$6.7 million of tangible net worth that, by the nature of the insurance business, we were able to deploy in marketable securities. It was easy to rearrange the portfolio into securities we would otherwise have owned at Berkshire itself. In effect, we were “trading dollars” for the net worth portion of the cost.
The \$1.9 million premium over net worth that Berkshire paid brought us an insurance business that usually delivered an underwriting profit. Even more important, the insurance operation carried with it \$19.4 million of “float” – money that belonged to others but was held by our two insurers.
Ever since, float has been of great importance to Berkshire. When we invest these funds, all dividends, interest and gains from their deployment belong to Berkshire. (If we experience investment losses, those, of course, are on our tab as well.)
Float materializes at p/c insurers in several ways: (1) Premiums are generally paid to the company upfront whereas losses occur over the life of the policy, usually a six-month or one-year period; (2) Though some losses, such as car repairs, are quickly paid, others – such as the harm caused by exposure to asbestos – may take many years to surface and even longer to evaluate and settle; (3) Loss payments are sometimes spread over decades in cases, say, of a person employed by one of our workers' compensation policyholders being permanently injured and thereafter requiring expensive lifetime care.
Float generally grows as premium volume increases. Additionally, certain p/c insurers specialize in lines of business such as medical malpractice or product liability – business labeled “long-tail” in industry jargon – that generate far more float than, say, auto collision and homeowner policies, which require insurers to almost immediately make payments to claimants for needed repairs.
Berkshire has been a leader in long-tail business for many years. In particular, we have specialized in jumbo reinsurance policies that leave us assuming long-tail losses already incurred by other p/c insurers. As a result of our emphasizing that sort of business, Berkshire's growth in float has been extraordinary. We are now the country's second largest p/c company measured by premium volume and its leader, by far, in float.
Here's the record:
(in \$ millions)
| Year | Premium Volume | Float |
| 1970 | $ 39 | $ 39 |
| 1980 | 185 | 237 |
| 1990 | 582 | 1,632 |
| 2000 | 19,343 | 27,871 |
| 2010 | 30,749 | 65,832 |
| 2017 | 60,597 | 114,500 |
Our 2017 volume was boosted by a huge deal in which we reinsured up to \$20 billion of long-tail losses that AIG had incurred. Our premium for this policy was \$10.2 billion, a world’s record and one we won’t come close to repeating. Premium volume will therefore fall somewhat in 2018.
Float will probably increase slowly for at least a few years. When we eventually experience a decline, it will be modest – at most 3% or so in any single year. Unlike bank deposits or life insurance policies containing surrender options, p/c float can’t be withdrawn. This means that p/c companies can’t experience massive “runs” in times of widespread financial stress, a characteristic of prime importance to Berkshire that we factor into our investment decisions.
Charlie and I never will operate Berkshire in a manner that depends on the kindness of strangers – or even that of friends who may be facing liquidity problems of their own. During the 2008-2009 crisis, we liked having Treasury Bills – loads of Treasury Bills – that protected us from having to rely on funding sources such as bank lines or commercial paper. We have intentionally constructed Berkshire in a manner that will allow it to comfortably withstand economic discontinuities, including such extremes as extended market closures.
* * * * * * * * * * * *
The downside of float is that it comes with risk, sometimes oceans of risk. What looks predictable in insurance can be anything but. Take the famous Lloyds insurance market, which produced decent results for three centuries. In the 1980's, though, huge latent problems from a few long-tail lines of insurance surfaced at Lloyds and, for a time, threatened to destroy its storied operation. (It has, I should add, fully recovered.)
Berkshire's insurance managers are conservative and careful underwriters, who operate in a culture that has long prioritized those qualities. That disciplined behavior has produced underwriting profits in most years, and in such instances, our cost of float was less than zero. In effect, we got paid then for holding the huge sums tallied in the earlier table.
I have warned you, however, that we have been fortunate in recent years and that the catastrophe-light period the industry was experiencing was not a new norm. Last September drove home that point, as three significant hurricanes hit Texas, Florida and Puerto Rico.
My guess at this time is that the insured losses arising from the hurricanes are \$100 billion or so. That figure, however, could be far off the mark. The pattern with most mega-catastrophes has been that initial loss estimates ran low. As well-known analyst V.J. Dowling has pointed out, the loss reserves of an insurer are similar to a self-graded exam. Ignorance, wishful thinking or, occasionally, downright fraud can deliver inaccurate figures about an insurer's financial condition for a very long time.
We currently estimate Berkshire’s losses from the three hurricanes to be \$3 billion (or about \$2 billion after tax). If both that estimate and my industry estimate of \$100 billion are close to accurate, our share of the industry loss was about 3%. I believe that percentage is also what we may reasonably expect to be our share of losses in future American mega-cats.
It’s worth noting that the \$2 billion net cost from the three hurricanes reduced Berkshire’s GAAP net worth by less than 1%. Elsewhere in the reinsurance industry there were many companies that suffered losses in net worth ranging from 7% to more than 15%. The damage to them could have been far worse: Had Hurricane Irma followed a path through Florida only a bit to the east, insured losses might well have been an additional \$100 billion.
We believe that the annual probability of a U.S. mega-catastrophe causing \$400 billion or more of insured losses is about 2%. No one, of course, knows the correct probability. We do know, however, that the risk increases over time because of growth in both the number and value of structures located in catastrophe-vulnerable areas.
No company comes close to Berkshire in being financially prepared for a \$400 billion mega-cat. Our share of such a loss might be \$12 billion or so, an amount far below the annual earnings we expect from our non-insurance activities. Concurrently, much – indeed, perhaps most – of the p/c world would be out of business. Our unparalleled financial strength explains why other p/c insurers come to Berkshire – and only Berkshire – when they, themselves, need to purchase huge reinsurance coverages for large payments they may have to make in the far future.
Prior to 2017, Berkshire had recorded 14 consecutive years of underwriting profits, which totaled \$28.3 billion pre-tax. I have regularly told you that I expect Berkshire to attain an underwriting profit in a majority of years, but also to experience losses from time to time. My warning became fact in 2017, as we lost \$3.2 billion pre-tax from underwriting.
A large amount of additional information about our various insurance operations is included in the 10-K at the back of this report. The only point I will add here is that you have some extraordinary managers working for you at our various p/c operations. This is a business in which there are no trade secrets, patents, or locational advantages. What counts are brains and capital. The managers of our various insurance companies supply the brains and Berkshire provides the capital.
* * * * * * * * * * * *
For many years, this letter has described the activities of Berkshire's many other businesses. That discussion has become both repetitious and partially duplicative of information regularly included in the 10-K that follows the letter. Consequently, this year I will give you a simple summary of our dozens of non-insurance businesses. Additional details can be found on pages K-5 – K-22 and pages K-40 – K-50.
Viewed as a group – and excluding investment income – our operations other than insurance delivered pre-tax income of \$20 billion in 2017, an increase of \$950 million over 2016. About 44% of the 2017 profit came from two subsidiaries. BNSF, our railroad, and Berkshire Hathaway Energy (of which we own 90.2%). You can read more about these businesses on pages K-5 – K-10 and pages K-40 – K-44.
Proceeding down Berkshire’s long list of subsidiaries, our next five non-insurance businesses, as ranked by earnings (but presented here alphabetically) Clayton Homes, International Metalworking Companies, Lubrizol, Marmon and Precision Castparts had aggregate pre-tax income in 2017 of \$5.5 billion, little changed from the \$5.4 billion these companies earned in 2016.
The next five, similarly ranked and listed (Forest River, Johns Manville, MiTek, Shaw and TTI) earned \$2.1 billion last year, up from \$1.7 billion in 2016.
The remaining businesses that Berkshire owns – and there are many – recorded little change in pre-tax income, which was \$3.7 billion in 2017 versus \$3.5 billion in 2016.
Depreciation charges for all of these non-insurance operations totaled \$7.6 billion; capital expenditures were \$11.5 billion. Berkshire is always looking for ways to expand its businesses and regularly incurs capital expenditures that far exceed its depreciation charge. Almost 90% of our investments are made in the United States. America’s economic soil remains fertile.
Amortization charges were an additional \$1.3 billion. I believe that in large part this item is not a true economic cost. Partially offsetting this good news is the fact that BNSF (like all other railroads) records depreciation charges that fall well short of the sums regularly needed to keep the railroad in first-class shape.
Berkshire’s goal is to substantially increase the earnings of its non-insurance group. For that to happen, we will need to make one or more huge acquisitions. We certainly have the resources to do so. At yearend Berkshire held \$116.0 billion in cash and U.S. Treasury Bills (whose average maturity was 88 days), up from \$86.4 billion at yearend 2016. This extraordinary liquidity earns only a pittance and is far beyond the level Charlie and I wish Berkshire to have. Our smiles will broaden when we have redeployed Berkshire’s excess funds into more productive assets.
Investments
Below we list our fifteen common stock investments that at yearend had the largest market value. We exclude our Kraft Heinz holding – 325,442,152 shares – because Berkshire is part of a control group and therefore must account for this investment on the “equity” method. On its balance sheet, Berkshire carries its Kraft Heinz holding at a GAAP figure of \$17.6 billion. The shares had a yearend market value of \$25.3 billion, and a cost basis of \$9.8 billion.
| Shares* | Company | Percentage of Company Owned | 12/31/17 | |
| Cost** | Market | |||
| (in millions) | ||||
| 151,610,700 | American Express Company | 17.6 | $ 1,287 | $ 15,056 |
| 166,713,209 | Apple Inc. | 3.3 | 20,961 | 28,213 |
| 700,000,000 | Bank of America Corporation | 6.8 | 5,007 | 20,664 |
| 53,307,534 | The Bank of New York Mellon Corporation | 5.3 | 2,230 | 2,871 |
| 225,000,000 | BYD Company Ltd. | 8.2 | 232 | 1,961 |
| 6,789,054 | Charter Communications, Inc. | 2.8 | 1,210 | 2,281 |
| 400,000,000 | The Coca-Cola Company | 9.4 | 1,299 | 18,352 |
| 53,110,395 | Delta Airlines Inc. | 7.4 | 2,219 | 2,974 |
| 44,527,147 | General Motors Company | 3.2 | 1,343 | 1,825 |
| 11,390,582 | The Goldman Sachs Group, Inc. | 3.0 | 654 | 2,902 |
| 24,669,778 | Moody’s Corporation | 12.9 | 248 | 3,642 |
| 74,587,892 | Phillips 66 | 14.9 | 5,841 | 7,545 |
| 47,659,456 | Southwest Airlines Co. | 8.1 | 1,997 | 3,119 |
| 103,855,045 | U.S. Bancorp | 6.3 | 3,343 | 5,565 |
| 482,544,468 | Wells Fargo & Company | 9.9 | 11,837 | 29,276 |
| Others | 14,968 | 24,294 | ||
| Total Common Stocks Carried at Market | $ 74,676 | $ 170,540 | ||
* Excludes shares held by pension funds of Berkshire subsidiaries.
** This is our actual purchase price and also our tax basis; GAAP “cost” differs in a few cases because of write-downs that have been required under GAAP rules.
Some of the stocks in the table are the responsibility of either Todd Combs or Ted Weschler, who work with me in managing Berkshire's investments. Each, independently of me, manages more than \$12 billion; I usually learn about decisions they have made by looking at monthly portfolio summaries. Included in the \$25 billion that the two manage is more than \$8 billion of pension trust assets of certain Berkshire subsidiaries. As noted, pension investments are not included in the preceding tabulation of Berkshire holdings.
* * * * * * * * * * * *
Charlie and I view the marketable common stocks that Berkshire owns as interests in businesses, not as ticker symbols to be bought or sold based on their “chart” patterns, the “target” prices of analysts or the opinions of media pundits. Instead, we simply believe that if the businesses of the investees are successful (as we believe most will be) our investments will be successful as well. Sometimes the payoffs to us will be modest; occasionally the cash register will ring loudly. And sometimes I will make expensive mistakes. Overall – and over time – we should get decent results. In America, equity investors have the wind at their back.
From our stock portfolio – call our holdings “minority interests” in a diversified group of publicly-owned businesses – Berkshire received \$3.7 billion of dividends in 2017. That’s the number included in our GAAP figures, as well as in the “operating earnings” we reference in our quarterly and annual reports.
That dividend figure, however, far understates the “true” earnings emanating from our stock holdings. For decades, we have stated in Principle 6 of our “Owner-Related Business Principles” (page 19) that we expect undistributed earnings of our investees to deliver us at least equivalent earnings by way of subsequent capital gains.
Our recognition of capital gains (and losses) will be lumpy, particularly as we conform with the new GAAP rule requiring us to constantly record unrealized gains or losses in our earnings. I feel confident, however, that the earnings retained by our investees will over time, and with our investees viewed as a group, translate into commensurate capital gains for Berkshire.
The connection of value-building to retained earnings that I’ve just described will be impossible to detect in the short term. Stocks surge and swoon, seemingly untethered to any year-to-year buildup in their underlying value. Over time, however, Ben Graham’s oft-quoted maxim proves true: “In the short run, the market is a voting machine; in the long run, however, it becomes a weighing machine.”
* * * * * * * * * * * *
Berkshire, itself, provides some vivid examples of how price randomness in the short term can obscure long-term growth in value. For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic. Year by year, we have moved forward. Yet Berkshire shares have suffered four truly major dips. Here are the gory details:
| Period | High | Low | Percentage Decrease |
| March 1973-January 1975 | 93 | 38 | (59.1%) |
| 10/2/87-10/27/87 | 4,250 | 2,675 | (37.1%) |
| 6/19/98-3/10/2000 | 80,900 | 41,300 | (48.9%) |
| 9/19/08-3/5/09 | 147,000 | 72,400 | (50.7%) |
This table offers the strongest argument I can muster against ever using borrowed money to own stocks. There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.
In the next 53 years our shares (and others) will experience declines resembling those in the table. No one can tell you when these will happen. The light can at any time go from green to red without pausing at yellow.
When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt. That's the time to heed these lines from Kipling's If:
"If you can keep your head when all about you are losing theirs . . .
If you can wait and not be tired by waiting . . .
If you can think – and not make thoughts your aim . . .
If you can trust yourself when all men doubt you . . .
Yours is the Earth and everything that's in it."
"The Bet" is Over and Has Delivered an Unforeseen Investment Lesson
Last year, at the $90\%$ mark, I gave you a detailed report on a ten-year bet I had made on December 19, 2007. (The full discussion from last year's annual report is reprinted on pages 24 - 26.) Now I have the final tally - and, in several respects, it's an eye-opener.
I made the bet for two reasons: (1) to leverage my outlay of \$318,250 into a disproportionately larger sum that – if things turned out as I expected – would be distributed in early 2018 to Girls Inc. of Omaha; and (2) to publicize my conviction that my pick – a virtually cost-free investment in an unmanaged S&P 500 index fund – would, over time, deliver better results than those achieved by most investment professionals, however well-regarded and incentivized those “helpers” may be.
Addressing this question is of enormous importance. American investors pay staggering sums annually to advisors, often incurring several layers of consequential costs. In the aggregate, do these investors get their money's worth? Indeed, again in the aggregate, do investors get anything for their outlays?
Protégé Partners, my counterparty to the bet, picked five “funds-of-funds” that it expected to overperform the S&P 500. That was not a small sample. Those five funds-of-funds in turn owned interests in more than 200 hedge funds.
Essentially, Protégé, an advisory firm that knew its way around Wall Street, selected five investment experts who, in turn, employed several hundred other investment experts, each managing his or her own hedge fund. This assemblage was an elite crew, loaded with brains, adrenaline and confidence.
The managers of the five funds-of-funds possessed a further advantage: They could – and did – rearrange their portfolios of hedge funds during the ten years, investing with new “stars” while exiting their positions in hedge funds whose managers had lost their touch.
Every actor on Protégé's side was highly incentivized: Both the fund-of-funds managers and the hedge-fund managers they selected significantly shared in gains, even those achieved simply because the market generally moves upwards. (In $100\%$ of the 43 ten-year periods since we took control of Berkshire, years with gains by the S&P 500 exceeded loss years.)
Those performance incentives, it should be emphasized, were frosting on a huge and tasty cake: Even if the funds lost money for their investors during the decade, their managers could grow very rich. That would occur because fixed fees averaging a staggering 2 $\frac{1}{2}$ % of assets or so were paid every year by the fund-of-funds' investors, with part of these fees going to the managers at the five funds-of-funds and the balance going to the 200-plus managers of the underlying hedge funds.
Here's the final scorecard for the bet:
| Year | Fund-of-Funds A | Fund-of-Funds B | Fund-of-Funds C | Fund-of-Funds D | Fund-of-Funds E | S&P Index Fund |
| 2008 | -16.5% | -22.3% | -21.3% | -29.3% | -30.1% | -37.0% |
| 2009 | 11.3% | 14.5% | 21.4% | 16.5% | 16.8% | 26.6% |
| 2010 | 5.9% | 6.8% | 13.3% | 4.9% | 11.9% | 15.1% |
| 2011 | -6.3% | -1.3% | 5.9% | -6.3% | -2.8% | 2.1% |
| 2012 | 3.4% | 9.6% | 5.7% | 6.2% | 9.1% | 16.0% |
| 2013 | 10.5% | 15.2% | 8.8% | 14.2% | 14.4% | 32.3% |
| 2014 | 4.7% | 4.0% | 18.9% | 0.7% | -2.1% | 13.6% |
| 2015 | 1.6% | 2.5% | 5.4% | 1.4% | -5.0% | 1.4% |
| 2016 | -3.2% | 1.9% | -1.7% | 2.5% | 4.4% | 11.9% |
| 2017 | 12.2% | 10.6% | 15.6% | N/A | 18.0% | 21.8% |
| Final Gain | 21.7% | 42.3% | 87.7% | 2.8% | 27.0% | 125.8% |
| Average Annual Gain | 2.0% | 3.6% | 6.5% | 0.3% | 2.4% | 8.5% |
Footnote: Under my agreement with Protégé Partners, the names of these funds-of-funds have never been publicly disclosed. I, however, have received their annual audits from Protégé. The 2016 figures for funds A, B and C were revised slightly from those originally reported last year. Fund D was liquidated in 2017; its average annual gain is calculated for the nine years of its operation.
The five funds-of-funds got off to a fast start, each beating the index fund in 2008. Then the roof fell in. In every one of the nine years that followed, the funds-of-funds as a whole trailed the index fund.
Let me emphasize that there was nothing aberrational about stock-market behavior over the ten-year stretch. If a poll of investment “experts” had been asked late in 2007 for a forecast of long-term common-stock returns, their guesses would have likely averaged close to the 8.5% actually delivered by the S&P 500. Making money in that environment should have been easy. Indeed, Wall Street “helpers” earned staggering sums. While this group prospered, however, many of their investors experienced a lost decade.
Performance comes, performance goes. Fees never falter.
* * * * * * * * * * * *
The bet illuminated another important investment lesson: Though markets are generally rational, they occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential.
Originally, Protégé and I each funded our portion of the ultimate \$1 million prize by purchasing \$500,000 face amount of zero-coupon U.S. Treasury bonds (sometimes called “strips”). These bonds cost each of us \$318,250 – a bit less than 64¢ on the dollar – with the \$500,000 payable in ten years.
As the name implies, the bonds we acquired paid no interest, but (because of the discount at which they were purchased) delivered a 4.56% annual return if held to maturity. Protégé and I originally intended to do no more than tally the annual returns and distribute \$1 million to the winning charity when the bonds matured late in 2017.
After our purchase, however, some very strange things took place in the bond market. By November 2012, our bonds – now with about five years to go before they matured – were selling for 95.7% of their face value. At that price, their annual yield to maturity was less than 1%. Or, to be precise, .88%.
Given that pathetic return, our bonds had become a dumb – a really dumb – investment compared to American equities. Over time, the S&P 500 – which mirrors a huge cross-section of American business, appropriately weighted by market value – has earned far more than 10% annually on shareholders' equity (net worth).
In November 2012, as we were considering all this, the cash return from dividends on the S&P 500 was $2\frac{1}{2}\%$ annually, about triple the yield on our U.S. Treasury bond. These dividend payments were almost certain to grow. Beyond that, huge sums were being retained by the companies comprising the 500. These businesses would use their retained earnings to expand their operations and, frequently, to repurchase their shares as well. Either course would, over time, substantially increase earnings-per-share. And – as has been the case since 1776 – whatever its problems of the minute, the American economy was going to move forward.
Presented late in 2012 with the extraordinary valuation mismatch between bonds and equities, Protégé and I agreed to sell the bonds we had bought five years earlier and use the proceeds to buy 11,200 Berkshire “B” shares. The result: Girls Inc. of Omaha found itself receiving \$2,222,279 last month rather than the \$1 million it had originally hoped for.
Berkshire, it should be emphasized, has not performed brilliantly since the 2012 substitution. But brilliance wasn't needed: After all, Berkshire's gain only had to beat that annual .88% bond bogey – hardly a Herculean achievement.
The only risk in the bonds-to-Berkshire switch was that yearend 2017 would coincide with an exceptionally weak stock market. Protégé and I felt this possibility (which always exists) was very low. Two factors dictated this conclusion: The reasonable price of Berkshire in late 2012, and the large asset build-up that was almost certain to occur at Berkshire during the five years that remained before the bet would be settled. Even so, to eliminate all risk to the charities from the switch, I agreed to make up any shortfall if sales of the 11,200 Berkshire shares at yearend 2017 didn't produce at least \$1 million.
* * * * * * * * * * * *
Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.
By that standard, purportedly “risk-free” long-term bonds in 2012 were a far riskier investment than a long-term investment in common stocks. At that time, even a 1% annual rate of inflation between 2012 and 2017 would have decreased the purchasing-power of the government bond that Protégé and I sold.
I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier – far riskier – than short-term U.S. bonds. As an investor's investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.
It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals – to measure their investment “risk” by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk.
* * * * * * * * * * * *
A final lesson from our bet: Stick with big, “easy” decisions and eschew activity. During the ten-year bet, the 200-plus hedge-fund managers that were involved almost certainly made tens of thousands of buy and sell decisions. Most of those managers undoubtedly thought hard about their decisions, each of which they believed would prove advantageous. In the process of investing, they studied 10-Ks, interviewed managements, read trade journals and conferred with Wall Street analysts.
Protégé and I, meanwhile, leaning neither on research, insights nor brilliance, made only one investment decision during the ten years. We simply decided to sell our bond investment at a price of more than 100 times earnings (95.7 sale price/.88 yield), those being “earnings” that could not increase during the ensuing five years.
We made the sale in order to move our money into a single security – Berkshire – that, in turn, owned a diversified group of solid businesses. Fueled by retained earnings, Berkshire’s growth in value was unlikely to be less than 8% annually, even if we were to experience a so-so economy.
After that kindergarten-like analysis, Protégé and I made the switch and relaxed, confident that, over time, 8% was certain to beat .88%. By a lot.
The Annual Meeting
The annual meeting falls on May 5 $^{th}$ and will again be webcast by Yahoo!, whose web address is https://finance.yahoo.com/brklivestream. The webcast will go live at 8:45 a.m. Central Daylight Time. Yahoo! will interview directors, managers, stockholders and celebrities before the meeting and during the lunch break. Both the interviews and meeting will be translated simultaneously into Mandarin.
Our partnership with Yahoo! began in 2016 and shareholders have responded enthusiastically. Last year, real-time viewership increased 72% to about 3.1 million and replays of short segments totaled 17.1 million.
For those attending the meeting in person, the doors at the CenturyLink will open at 7:00 a.m. on Saturday to facilitate shopping prior to our shareholder movie, which begins at 8:30. The question-and-answer period will start at 9:15 and run until 3:30, with a one-hour lunch break at noon. Finally, at 3:45 we will begin the formal shareholder meeting, which usually runs from 15 to 45 minutes. Shopping will end at 4:30.
On Friday, May 4 $^{th}$ , our Berkshire exhibitors at CenturyLink will be open from noon until 5 p.m. We added that extra shopping time in 2015, and serious shoppers love it. Last year about 12,000 people came through the doors in the five hours we were open on Friday.
Your venue for shopping will be the 194,300-square-foot hall that adjoins the meeting and in which products from dozens of our subsidiaries will be for sale. (Your Chairman discourages freebies.) Say hello to the many Berkshire managers who will be captaining their exhibits. And be sure to view the terrific BNSF railroad layout that salutes all of our companies.
Brooks, our running-shoe company, will again have a special commemorative shoe to offer at the meeting. After you purchase a pair, wear them on Sunday at our sixth annual “Berkshire 5K,” an 8 a.m. race starting at the CenturyLink. Full details for participating will be included in the Visitor’s Guide that will be sent to you with your meeting credentials. Entrants in the race will find themselves running alongside many of Berkshire’s managers, directors and associates. (Charlie and I, however, will sleep in; even with Brooks running shoes, our times would be embarrassing.) Participation in the 5K grows every year. Help us set another record.
A GEICO booth in the shopping area will be staffed by a number of the company's top counselors from around the country. At last year's meeting, we set a record for policy sales, up $43\%$ from 2016.
So stop by for a quote. In most cases, GEICO will be able to give you a shareholder discount (usually 8%). This special offer is permitted by 44 of the 51 jurisdictions in which we operate. (One supplemental point: The discount is not additive if you qualify for another discount, such as that available to certain groups.) Bring the details of your existing insurance and check out our price. We can save many of you real money. Spend the savings on other Berkshire products.
Be sure to visit the Bookworm. This Omaha-based retailer will carry more than 40 books and DVDs, among them a couple of new titles. Berkshire shareholders are a bookseller's dream: When Poor Charlie's Almanack (yes, our Charlie) made its debut some years ago, we sold 3,500 copies at the meeting. The book weighed 4.85 pounds. Do the math: Our shareholders left the building that day carrying about $8 \frac{1}{2}$ tons of Charlie's wisdom.
An attachment to the proxy material that is enclosed with this report explains how you can obtain the credential you will need for admission to both the meeting and other events. Keep in mind that most airlines substantially increase prices for the Berkshire weekend. If you are coming from far away, compare the cost of flying to Kansas City vs. Omaha. The drive between the two cities is about 2½ hours, and it may be that Kansas City can save you significant money. The savings for a couple could run to \$1,000 or more. Spend that money with us.
At Nebraska Furniture Mart, located on a 77-acre site on 72 $^{nd}$ Street between Dodge and Pacific, we will again be having “Berkshire Weekend” discount pricing. To obtain the Berkshire discount at NFM, you must make your purchases between Tuesday, May 1 $^{st}$ and Monday, May 7 $^{th}$ inclusive, and must also present your meeting credential. Last year, the one-week volume for the store was a staggering \$44.6 million. Bricks and mortar are alive and well at NFM.
The period's special pricing will even apply to the products of several prestigious manufacturers that normally have ironclad rules against discounting but which, in the spirit of our shareholder weekend, have made an exception for you. We appreciate their cooperation. During “Berkshire Weekend,” NFM will be open from 10 a.m. to 9 p.m. Monday through Saturday and 11 a.m. to 8 p.m. on Sunday. From 5:30 p.m. to 8 p.m. on Saturday, NFM is hosting a picnic to which you are all invited.
NFM will again extend its shareholder's discount offerings to our Kansas City and Dallas stores. From May $1^{\text{st}}$ through May $7^{\text{th}}$ , shareholders who present meeting credentials or other evidence of their Berkshire ownership (such as brokerage statements) to those NFM stores will receive the same discounts enjoyed by those visiting the Omaha store.
At Borsheims, we will again have two shareholder-only events. The first will be a cocktail reception from 6 p.m. to 9 p.m. on Friday, May 4 $^{th}$ . The second, the main gala, will be held on Sunday, May 6 $^{th}$ , from 9 a.m. to 4 p.m. On Saturday, we will remain open until 6 p.m. Remember, the more you buy, the more you save (or so my daughter tells me when we visit the store).
We will have huge crowds at Borsheims throughout the weekend. For your convenience, therefore, shareholder prices will be available from Monday, April 30 $^{th}$ through Saturday, May 12 $^{th}$ . During that period, please identify yourself as a shareholder either by presenting your meeting credential or a brokerage statement showing you own our stock.
On Sunday afternoon, on the upper level above Borsheims, we will have Bob Hamman and Sharon Osberg, two of the world's top bridge experts, available to play with our shareholders. If they suggest wagering on the game, change the subject. Ajit, Charlie, Bill Gates and I will likely drop by as well.
My friend, Ariel Hsing, will be in the mall as well on Sunday, taking on challengers at table tennis. I met Ariel when she was nine, and even then I was unable to score a point against her. Ariel represented the United States in the 2012 Olympics. If you don't mind embarrassing yourself, test your skills against her, beginning at 1 p.m. Bill Gates did pretty well playing Ariel last year, so he may be ready to again challenge her. (My advice: Bet on Ariel.) I will participate on an advisory basis only.
Gorat's will be open exclusively for Berkshire shareholders on Sunday, May $6^{\text{th}}$ , serving from 12 p.m. until 10 p.m. To make a reservation at Gorat's, call 402-551-3733 on April $2^{\text{nd}}$ (but not before). Show you are a sophisticated diner by ordering the T-bone with hash browns.
We will have the same three financial journalists lead the question-and-answer period at the meeting, asking Charlie and me questions that shareholders have submitted to them by e-mail. The journalists and their e-mail addresses are: Carol Loomis, the preeminent business journalist of her time, who may be e-mailed at loomisbrk@gmail.com; Becky Quick, of CNBC, at BerkshireQuestions@cnbc.com; and Andrew Ross Sorkin, of the New York Times, at arsorkin@nytimes.com.
From the questions submitted, each journalist will choose the six he or she decides are the most interesting and important to shareholders. The journalists have told me your question has the best chance of being selected if you keep it concise, avoid sending it in at the last moment, make it Berkshire-related and include no more than two questions in any e-mail you send them. (In your e-mail, let the journalist know if you would like your name mentioned if your question is asked.)
An accompanying set of questions will be asked by three analysts who follow Berkshire. This year the insurance specialist will be Gary Ransom of Dowling & Partners. Questions that deal with our non-insurance operations will come from Jonathan Brandt of Ruane, Cunniff & Goldfarb and Gregg Warren of Morningstar. Since what we will be conducting is a shareholders' meeting, our hope is that the analysts and journalists will ask questions that add to our owners' understanding and knowledge of their investment.
Neither Charlie nor I will get so much as a clue about the questions headed our way. Some will be tough, for sure, and that's the way we like it. Multi-part questions aren't allowed; we want to give as many questioners as possible a shot at us. Our goal is for you to leave the meeting knowing more about Berkshire than when you came and for you to have a good time while in Omaha.
All told, we expect at least 54 questions, which will allow for six from each analyst and journalist and for 18 from the audience. After the 54 $^{th}$ , all questions come from the audience. Charlie and I have often tackled more than 60 by 3:30.
The questioners from the audience will be chosen by means of 11 drawings that will take place at 8:15 a.m. on the morning of the annual meeting. Each of the 11 microphones installed in the arena and main overflow room will host, so to speak, a drawing.
While I'm on the subject of our owners' gaining knowledge, let me remind you that Charlie and I believe all shareholders should simultaneously have access to new information that Berkshire releases and, if possible, should also have adequate time to digest and analyze that information before any trading takes place. That's why we try to issue financial data late on Fridays or early on Saturdays and why our annual meeting is always held on a Saturday (a day that also eases traffic and parking problems).
We do not follow the common practice of talking one-on-one with large institutional investors or analysts, treating them instead as we do all other shareholders. There is no one more important to us than the shareholder of limited means who trusts us with a substantial portion of his or her savings. As I run the company day-to-day – and as I write this letter – that is the shareholder whose image is in my mind.
* * * * * * * * * * * *
For good reason, I regularly extol the accomplishments of our operating managers. They are truly All-Stars who run their businesses as if they were the only asset owned by their families. I also believe the mindset of our managers to be as shareholder-oriented as can be found in the universe of large publicly-owned companies. Most of our managers have no financial need to work. The joy of hitting business “home runs” means as much to them as their paycheck.
If managers (or directors) own Berkshire shares – and many do – it’s from open-market purchases they have made or because they received shares when they sold their businesses to us. None, however, gets the upside of ownership without risking the downside. Our directors and managers stand in your shoes.
We continue to have a wonderful group at headquarters. This team efficiently deals with a multitude of SEC and other regulatory requirements, files a 32,700-page Federal income tax return, oversees the filing of 3,935 state tax returns, responds to countless shareholder and media inquiries, gets out the annual report, prepares for the country's largest annual meeting, coordinates the Board's activities, fact-checks this letter – and the list goes on and on.
They handle all of these business tasks cheerfully and with unbelievable efficiency, making my life easy and pleasant. Their efforts go beyond activities strictly related to Berkshire: Last year, for example, they dealt with the 40 universities (selected from 200 applicants) who sent students to Omaha for a Q&A day with me. They also handle all kinds of requests that I receive, arrange my travel, and even get me hamburgers and French fries (smothered in Heinz ketchup, of course) for lunch. In addition, they cheerfully pitch in to help at the annual meeting in whatever way they are needed. They are proud to work for Berkshire, and I am proud of them.
* * * * * * * * * * * *
I’ve saved the best for last. Early in 2018, Berkshire’s board elected Ajit Jain and Greg Abel as directors of Berkshire and also designated each as Vice Chairman. Ajit is now responsible for insurance operations, and Greg oversees the rest of our businesses. Charlie and I will focus on investments and capital allocation.
You and I are lucky to have Ajit and Greg working for us. Each has been with Berkshire for decades, and Berkshire's blood flows through their veins. The character of each man matches his talents. And that says it all.
Come to Omaha – the cradle of capitalism – on May 5 $^{th}$ and meet the Berkshire Bunch. All of us look forward to your visit.
February 24, 2018
Warren E. Buffett
Chairman of the Board
伯克希尔业绩 vs. 标普500
| 年份 | 年度百分比变化 | ||
| 伯克希尔每股账面价值 | 伯克希尔每股市场价值 | 标普500（含股息） | |
| 1965 | 23.8 | 49.5 | 10.0 |
| 1966 | 20.3 | (3.4) | (11.7) |
| 1967 | 11.0 | 13.3 | 30.9 |
| 1968 | 19.0 | 77.8 | 11.0 |
| 1969 | 16.2 | 19.4 | (8.4) |
| 1970 | 12.0 | (4.6) | 3.9 |
| 1971 | 16.4 | 80.5 | 14.6 |
| 1972 | 21.7 | 8.1 | 18.9 |
| 1973 | 4.7 | (2.5) | (14.8) |
| 1974 | 5.5 | (48.7) | (26.4) |
| 1975 | 21.9 | 2.5 | 37.2 |
| 1976 | 59.3 | 129.3 | 23.6 |
| 1977 | 31.9 | 46.8 | (7.4) |
| 1978 | 24.0 | 14.5 | 6.4 |
| 1979 | 35.7 | 102.5 | 18.2 |
| 1980 | 19.3 | 32.8 | 32.3 |
| 1981 | 31.4 | 31.8 | (5.0) |
| 1982 | 40.0 | 38.4 | 21.4 |
| 1983 | 32.3 | 69.0 | 22.4 |
| 1984 | 13.6 | (2.7) | 6.1 |
| 1985 | 48.2 | 93.7 | 31.6 |
| 1986 | 26.1 | 14.2 | 18.6 |
| 1987 | 19.5 | 4.6 | 5.1 |
| 1988 | 20.1 | 59.3 | 16.6 |
| 1989 | 44.4 | 84.6 | 31.7 |
| 1990 | 7.4 | (23.1) | (3.1) |
| 1991 | 39.6 | 35.6 | 30.5 |
| 1992 | 20.3 | 29.8 | 7.6 |
| 1993 | 14.3 | 38.9 | 10.1 |
| 1994 | 13.9 | 25.0 | 1.3 |
| 1995 | 43.1 | 57.4 | 37.6 |
| 1996 | 31.8 | 6.2 | 23.0 |
| 1997 | 34.1 | 34.9 | 33.4 |
| 1998 | 48.3 | 52.2 | 28.6 |
| 1999 | 0.5 | (19.9) | 21.0 |
| 2000 | 6.5 | 26.6 | (9.1) |
| 2001 | (6.2) | 6.5 | (11.9) |
| 2002 | 10.0 | (3.8) | (22.1) |
| 2003 | 21.0 | 15.8 | 28.7 |
| 2004 | 10.5 | 4.3 | 10.9 |
| 2005 | 6.4 | 0.8 | 4.9 |
| 2006 | 18.4 | 24.1 | 15.8 |
| 2007 | 11.0 | 28.7 | 5.5 |
| 2008 | (9.6) | (31.8) | (37.0) |
| 2009 | 19.8 | 2.7 | 26.5 |
| 2010 | 13.0 | 21.4 | 15.1 |
| 2011 | 4.6 | (4.7) | 2.1 |
| 2012 | 14.4 | 16.8 | 16.0 |
| 2013 | 18.2 | 32.7 | 32.4 |
| 2014 | 8.3 | 27.0 | 13.7 |
| 2015 | 6.4 | (12.5) | 1.4 |
| 2016 | 10.7 | 23.4 | 12.0 |
| 2017 | 23.0 | 21.9 | 21.8 |
| 复合年收益率 – 1965-2017 | 19.1% | 20.9% | 9.9% |
| 总收益率 – 1964-2017 | 1,088,029% | 2,404,748% | 15,508% |
说明：以下数据按日历年统计，但以下年份除外：1965年和1966年，数据截至9月30日；1967年，数据为截至12月31日的15个月。自1979年起，会计准则要求保险公司按市价而非原先的成本与市价孰低法来计量其持有的权益证券。本表中，伯克希尔1978年之前的数据已按新规则重述。其他所有方面，均按最初报告的数值计算。标普500指数为税前数据，而伯克希尔数据为税后数据。如果一家像伯克希尔这样的公司只是持有标普500指数并计提相应税款，那么在该指数正回报的年份，其业绩将落后于标普500；而在该指数负回报的年份，其业绩将超过标普500。多年来，累计的税负成本将导致其整体明显落后。
伯克希尔·哈撒韦公司
致伯克希尔·哈撒韦公司股东：
2017年，伯克希尔的净资产增加了653亿美元，这使得我们A类股和B类股的每股账面价值均增长了23%。在过去的53年间（即自现任管理层接手以来），每股账面价值从19美元增长至211,750美元，年复合增长率为19.1%。*
上述开头的格式已沿用30年。但2017年绝非寻常：我们的收益中很大一部分并非来自伯克希尔的经营成就。
尽管如此，那653亿美元的增益是真实存在的——请放心。但其中只有360亿美元来自伯克希尔的经营。剩下的290亿美元是在12月美国国会改写税法时送到我们手里的。（伯克希尔与税收相关的增益详情见K-32页及K-89至K-90页。）
在陈述完这些财务事实后，我更愿意立刻转向讨论伯克希尔的经营情况。但还有另一个插曲，我必须先告诉你们一项新会计准则——美国通用会计准则（GAAP）——它将在未来的季度和年度报告中严重扭曲伯克希尔的净利润数字，并且常常误导评论者和投资者。
新规则要求，我们持有的股票未实现投资收益和损失的净变动，必须计入我们向你们报告的所有净利润数据。这一要求将导致我们GAAP底线数字出现极其剧烈和反复无常的波动。伯克希尔持有1700亿美元的可交易股票（不包含我们对卡夫亨氏的持股），这些持仓的市值在一个季度报告期内很容易出现100亿美元或更多的波动。将如此规模的剧烈波动纳入报告净利润，将淹没描述我们经营业绩的真正重要数字。从分析目的来看，伯克希尔的“底线”将毫无用处。
新规则加剧了我们长期处理已实现收益（或损失）时的沟通问题——会计准则强迫我们将这些收益计入净利润。在过去的季度和年度新闻稿中，我们经常提醒你们不要关注这些已实现收益，因为它们——正如我们的未实现收益一样——是随机波动的。
这主要是因为我们在卖出证券时，是因为这样做似乎是明智之举，而不是因为我们试图以任何方式影响利润。因此，有时我们在某个期间报告了巨额已实现收益，而我们的整体投资组合表现却很糟糕（或者相反）。
关于未实现收益的新规加剧了现有已实现收益规则造成的扭曲，我们每个季度都会不厌其烦地解释你需要如何调整才能理解我们的数字。但电视上对财报的评论往往在收到数据后立即播出，报纸头条也几乎总是聚焦GAAP净利润的同比变化。因此，媒体报道有时会突出一些不必要的数字，让许多读者或观众要么惊慌失措，要么盲目乐观。
我们将尝试缓解这个问题，继续在周五晚（股市收盘后）或周六一早发布财务报告。这样你能有最充分的时间进行分析，投资专业人士也有机会在周一开盘前给出深思熟虑的评论。不过，我预计那些视会计为“外语”的股东仍会相当困惑。
对伯克希尔而言，最重要的是我们正常化每股盈利能力的提升。这个指标是我和长期合伙人查理·芒格关注的重点——我们也希望你们同样关注。我们2017年的成绩单如下。
收购
有四个要素能为伯克希尔增值：(1) 大规模独立收购；(2) 与现有业务匹配的补强型收购；(3) 我们众多业务的内生增长和利润率提升；(4) 我们庞大的股票和债券组合产生的投资收益。本节我们将回顾2017年的收购活动。
在寻找新的独立业务时，我们寻求的关键特质是：持久的竞争优势；能干且高素质的管理层；运营业务所需净有形资产的良好回报；以诱人回报率实现内生增长的机会；最后，合理的收购价格。
最后这一条要求几乎阻碍了我们在2017年审视的所有交易——因为那些“不错但远非出色”的企业的价格创下了历史新高。事实上，对一大群乐观的买家来说，价格似乎根本无关紧要。
为何会有这种收购狂潮？部分原因是CEO这个职位天然吸引“行动派”类型的人。如果华尔街分析师或董事会成员敦促那种类型的CEO考虑潜在收购，这有点像告诉一个青春期的孩子：“你最好过上正常的性生活。”
一旦CEO渴望达成交易，他/她永远不愁找不到证明收购合理性的预测。下属们会欢呼雀跃，憧憬着更大的地盘，以及通常随公司规模而增长的薪酬水平。投资银行家们闻到了巨额费用，也会拍手叫好。（别问理发师你需不需要理发。）如果目标公司的历史表现不足以支撑收购，那么就会预测出巨大的“协同效应”。电子表格从来不会让人失望。
2017年异常低廉的债务供应进一步助长了收购活动。毕竟，即使是高价交易，如果用债务融资，通常也能提高每股收益。相比之下，伯克希尔评估收购时采用的是全股权基础，因为我们深知自己对总体债务的偏好极低，而且将大量债务分配给任何一家单独的业务通常是错误的（某些例外情况除外，例如专门用于Clayton贷款组合的债务或我们受监管公用事业的固定资产承诺）。我们也从不考虑协同效应，事实上也很少能碰到。
多年来，我们对杠杆的厌恶降低了我们的回报率。但查理和我睡得很安稳。我们都认为，为了得到你不需要的东西，而冒险失去你拥有且需要的东西，这是发疯的行为。50年前，当我们各自管理一个由几位信赖我们的亲友资助的投资合伙公司时，我们就持有这种观点。如今，在伯克希尔大约有一百万位“合伙人”加入我们之后，我们依然如此。
尽管近期我们在收购方面遭遇了一段干旱期，但查理和我相信，伯克希尔不时仍会有机会进行大规模收购。在此期间，我们将坚守一条简单的原则：别人行事越不谨慎，我们自己就必须越谨慎。
去年，我们完成了一笔合理的独立收购：收购了Pilot Flying J（PFJ）38.6%的合伙企业权益。该公司年营业额约200亿美元，毫无疑问是全美领先的旅行中心运营商。
PFJ从一开始就由非凡的Haslam家族经营。60年前，“大Jim” Haslam怀揣着一个梦想和一家加油站起家。如今，他的儿子Jimmy管理着北美约750个地点的27,000名员工。伯克希尔已签订合同协议，将于2023年将其在PFJ的合伙企业权益增至80%；届时Haslam家族将持有剩余的20%。伯克希尔很高兴能成为他们的合伙人。
开车行驶在州际公路上时，不妨进来看看。PFJ出售汽油和柴油，食物也不错。如果开了长途，别忘了我们的站点还有5,200间淋浴室。
现在转向补强型收购。其中一些是小额交易，我不予赘述。不过，以下是几宗较大的收购，其交割时间跨度从2016年底持续到2018年初。
- Clayton Homes于2017年收购了两家传统住宅建筑商，此举使我们三年前才进入的该领域业务规模翻了一番以上。随着这些收购——科罗拉多州的Oakwood Homes和伯明翰的Harris Doyle——我预计2018年我们的现场建造住宅销售额将超过10亿美元。
尽管如此，Clayton的重点仍然是预制房屋，包括其建造和融资。2017年，Clayton通过自有零售业务售出19,168套，并向独立零售商批发26,706套。总体而言，Clayton去年占据了预制房屋市场49%的份额。这一行业领先的份额——约为最接近我们的竞争对手的3倍——与2003年（Clayton加入伯克希尔的那一年）的13%相比，已是天壤之别。
Clayton Homes和PFJ均总部设在诺克斯维尔，Clayton家族与Haslam家族在那里是世交。Kevin Clayton向Haslam家族谈及伯克希尔附属关系优势的言论，以及他对我表达的对Haslam家族的钦佩之情，帮助促成了PFJ的交易。
- 2016年底，我们的地面材料业务Shaw Industries收购了U.S. Floors（USF），一家快速增长的豪华乙烯基地砖分销商。USF的管理者Piet Dossche和Philippe Erramuzpe开局迅速，在2017年实现了40%的销售额增长，与此同时他们的业务也与Shaw进行了整合。显然，在收购USF的过程中，我们同时获得了优秀的人力资产和业务资产。
Shaw的CEO Vance Bell发起、谈判并完成了此次收购，使Shaw在2017年的销售额增至57亿美元，员工人数增至22,000人。通过收购USF，Shaw大大巩固了其作为伯克希尔重要且持久利润来源的地位。
- 我曾多次向你们提及HomeServices，我们不断发展的房地产经纪业务。伯克希尔是在2000年通过收购MidAmerican Energy（现更名为Berkshire Hathaway Energy）的多数股权而间接进入这一行业的。当时MidAmerican的业务主要集中于电力公用事业领域，我最初对HomeServices并未多加留意。
但是，年复一年，公司不断增聘经纪人。到2016年底，HomeServices已成为全美第二大经纪公司——不过仍远落后于行业龙头Realogy。然而在2017年，HomeServices的增长呈爆发态势。我们收购了行业第三大运营商Long and Foster、第十二大运营商Houlihan Lawrence以及Gloria Nilson。
这些收购为我们增加了12,300名经纪人，使总人数达到40,950人。如今HomeServices在住宅销售领域已接近全美领先地位，2017年参与的交易"边"（包括三家收购公司的备考数据）总额达1,270亿美元。解释一下这个术语：每笔交易都有两条"边"；如果我们同时代表买卖双方，那么交易金额就会计算两次。
尽管近期收购不断，HomeServices在2018年预计仅能完成全美住宅经纪业务的约3%。这意味着还有97%的空间。只要价格合理，我们就会在这个最基础的行业中持续增聘经纪人。
- 最后，Precision Castparts是一家通过收购成长起来的公司，它收购了德国耐腐蚀管件、管道系统及组件制造商Wilhelm Schulz GmbH。请允许我省略进一步的解释——我对制造业运营的理解远不如对房地产经纪、住宅建筑或卡车休息站那么深。
幸运的是，这次我无需亲自出马：Precision的首席执行官Mark Donegan是位卓越的制造业管理者，他负责的任何业务都注定会表现出色。押注于人有时比押注于实物资产更为确定。
现在让我们转向运营，首先从财产-意外险（以下简称"财险"）说起——这是我看得懂的业务，也是51年来推动伯克希尔增长的引擎。
保险
在讨论2017年保险业绩之前，请允许我回顾一下我们进入这个领域的方式和原因。我们于1967年初以860万美元收购了National Indemnity及其一家较小的姊妹公司。收购时我们获得了670万美元的有形净资产，这些资金凭借保险业务的性质，可以被我们用于投资有价证券。我们很容易将投资组合调整为原本就会在伯克希尔持有的证券。实际上，我们是用"换币"的方式获得了这笔净资产的成本部分。
伯克希尔支付的190万美元溢价（超过净资产部分）换来了一笔通常能产生承保利润的保险业务。更重要的是，这项保险业务还带来了1,940万美元的"浮存金"——这笔钱属于他人，但由我们的两家保险公司持有。
自那以后，浮存金对伯克希尔一直至关重要。当我们投资这些资金时，其产生的所有股息、利息和收益都归伯克希尔所有。（当然，如果出现投资亏损，那也得由我们承担。）
浮存金在财险公司中以多种方式产生：（1）保费通常预先支付给公司，而损失则在保单有效期内（通常半年或一年）发生；（2）尽管某些损失（如汽车修理）会很快赔付，但其他损失——例如石棉暴露造成的伤害——可能需要多年才显现，评估和解决所需时间更久；（3）有时损失赔付会延续数十年，例如我们一位工伤赔偿保单持有人的雇员永久伤残，此后需要昂贵的终身护理。
浮存金通常随保费规模增长而增加。此外，某些财险公司专门承保医疗事故或产品责任等业务——行业术语称为"长尾"业务——这类业务产生的浮存金远多于汽车碰撞险和房主险，后两者要求保险公司几乎立即向索赔人支付所需的维修费用。
伯克希尔（Berkshire）多年来一直是长尾业务的领军者。具体来说，我们专注于巨额再保险保单，由此承担其他财产/意外险保险公司已经发生的长尾损失。由于我们强调这类业务，伯克希尔的浮存金增长非常惊人。以保费规模衡量，我们现在是美国第二大财产/意外险公司，并且浮存金规模遥遥领先。
以下是记录：
（单位：百万美元）
| 年份 | 保费规模 | 浮存金 |
| 1970 | 39 | 39 |
| 1980 | 185 | 237 |
| 1990 | 582 | 1,632 |
| 2000 | 19,343 | 27,871 |
| 2010 | 30,749 | 65,832 |
| 2017 | 60,597 | 114,500 |
我们2017年的保费规模因一笔巨额交易而大增，该交易中我们为AIG（美国国际集团）已发生的长尾损失再保险了高达200亿美元。我们为此保单收取的保费是102亿美元，创下世界纪录，我们不可能再接近这个数字。因此，2018年的保费规模会有所下降。
浮存金可能将缓慢增长至少几年。当我们最终出现下降时，幅度也会很小——任何单一年份最多3%左右。与银行存款或含有退保选择权的人寿保险保单不同，财产/意外险浮存金不能被提取。这意味着在广泛的金融压力时期，财产/意外险公司不会遭受大规模“挤兑”，这一特征对伯克希尔至关重要，我们将其纳入投资决策。
查理（Charlie）和我绝不会以依赖陌生人善意的方式经营伯克希尔——甚至可能包括那些自身也面临流动性问题的朋友的善意。在2008-2009年危机期间，我们喜欢持有国库券——大量的国库券——这让我们不必依赖银行额度或商业票据等融资来源。我们有意识地构建了伯克希尔，使其能够从容应对经济断裂，包括市场长期关闭这样的极端情况。
浮存金的代价是伴随着风险，有时是巨大的风险。在保险中看似可预测的东西往往截然相反。以著名的劳合社（Lloyds）保险市场为例，它三个世纪以来业绩不错。然而在20世纪80年代，一些长尾保险业务线隐藏的巨大问题在劳合社浮出水面，曾一度威胁要摧毁其传奇的运营。（我应该补充一句，它已经完全恢复。）
伯克希尔的保险经理是保守而谨慎的承销商，他们在长期重视这些特质的文化中运营。这种纪律严明的行为在大多数年份产生了承保利润，在这种情况下，我们的浮存金成本为负。实际上，那时我们持有了上表中列出的巨额资金，还能收到钱。
不过，我已经警告过你们，我们近年来一直很幸运，行业经历的这个巨灾偏少时期并非新常态。去年9月就证明了这一点，当时三场重大飓风袭击了德克萨斯州、佛罗里达州和波多黎各。
我目前猜测，这些飓风造成的保险损失约为1000亿美元。不过，这个数字可能远低于实际。大多数超级巨灾的规律是初始损失估计往往偏低。正如著名分析师V.J. Dowling指出的，保险公司的损失准备金类似于一份自我评分的考试。无知、一厢情愿或偶尔的彻头彻尾的欺诈，可能在很长时期内给出关于保险公司财务状况的不准确数字。
我们目前估算，伯克希尔因这三场飓风造成的损失为30亿美元（税后约20亿美元）。如果这个数字和我对整个行业的估算——1000亿美元——都接近准确，那么我们在行业损失中的占比约为3%。我相信这一比例也是我们在未来美国超级巨灾中可合理预期承担的损失份额。
值得指出的是，这三场飓风带来的20亿美元净成本，使伯克希尔按美国通用会计准则（GAAP）计算的净资产减少了不到1%。而在再保险行业的其他地方，许多公司的净资产损失在7%到15%以上。它们本可能遭受更严重的冲击：如果飓风伊尔玛的路径再稍偏东一些穿过佛罗里达，保险损失可能还会再增加1000亿美元。
我们相信，美国每年发生保险损失达到4000亿美元或以上的超级巨灾的概率约为2%。当然，没有人知道确切的概率。但我们知道，随着易受巨灾影响的地区的建筑数量和价值的增长，风险随时间推移在增加。
没有哪家公司像伯克希尔这样，在财务上为4000亿美元的超级巨灾做好了准备。我们在这种损失中的份额可能约为120亿美元，远低于我们预期从非保险业务中获得的年度收益。与此同时，整个财产/意外险（p/c）行业中的大部分——甚至可能是大部分——公司将倒闭。我们无与伦比的财务实力解释了为什么其他财产/意外险公司会来找伯克希尔——而且只找伯克希尔——当它们自己需要购买大额再保险覆盖以应对未来可能需要支付的大额赔款时。
在2017年之前，伯克希尔连续14年录得承保利润，税前总计283亿美元。我经常告诉你们，我预计伯克希尔在大多数年份会实现承保利润，但也会时不时地出现亏损。我的警告在2017年成为了现实，我们当年承保亏损了税前32亿美元。
在本报告后面的10-K中，包含了关于我们各类保险业务的更多信息。我在这里只想补充一点：你们在各类财产/意外险业务中拥有一些杰出的管理者。这是一个没有商业秘密、专利或区位优势的行业。重要的是头脑和资本。我们各保险公司的管理者提供头脑，伯克希尔提供资本。
多年来，这封信一直描述伯克希尔众多其他业务的活动。这些讨论既变得重复，又部分与信中附后的10-K中定期包含的信息重合。因此，今年我将对咱们的数十家非保险业务做一个简单的总结。更多细节可见于K-5至K-22页和K-40至K-50页。
作为一个整体——且不包括投资收益——我们的非保险业务在2017年贡献了税前利润200亿美元，比2016年增加了9.5亿美元。其中约44%的利润来自两家子公司：我们的铁路公司BNSF，以及伯克希尔·哈撒韦能源公司（我们持有90.2%的股份）。你可以在K-5至K-10页和K-40至K-44页读到更多关于这些业务的信息。
继续往下看伯克希尔长长的子公司名单，接下来按盈利排名（但此处按字母顺序列出）的五家非保险业务——Clayton Homes、International Metalworking Companies、Lubrizol、Marmon和Precision Castparts——在2017年的税前总利润为55亿美元，与这些公司2016年的54亿美元相比变化不大。
再接下来的五家，同样按排名和字母顺序列出（Forest River、Johns Manville、MiTek、Shaw和TTI），去年盈利21亿美元，高于2016年的17亿美元。
伯克希尔拥有的其余业务——而且数量不少——税前利润变化不大，2017年为37亿美元，2016年为35亿美元。
所有这些非保险业务的折旧费用合计为76亿美元；资本支出为115亿美元。伯克希尔一直在寻找扩展业务的方法，经常产生远超折旧费用的资本支出。我们的投资近90%在美国。美国的经济土壤依然肥沃。
摊销费用另加13亿美元。我认为在很大程度上，这一项并非真正的经济成本。部分抵消这一好消息的是，BNSF（北伯林顿铁路公司，与其他所有铁路公司一样）记录的折旧费用远低于维持铁路一流状态通常所需的金额。
伯克希尔的目标是大幅提高其非保险集团的收益。要实现这一点，我们需要进行一笔或更多笔大规模收购。我们当然有资源去实现。年末，伯克希尔持有1160亿美元现金和美国国库券（平均期限88天），高于2016年末的864亿美元。这笔非凡的流动性只赚取微薄收益，远远超出查理和我希望伯克希尔持有的水平。当我们把伯克希尔的过剩资金重新配置到更有生产性的资产时，我们的笑容会更灿烂。
投资
下面列出我们年末市值最大的15只普通股投资。我们排除了对卡夫亨氏（Kraft Heinz）的持股——325,442,152股——因为伯克希尔属于控股集团，因此必须按"权益"法核算这项投资。在其资产负债表上，伯克希尔以美国通用会计准则（GAAP）的176亿美元入账卡夫亨氏持仓。这些股票年末市值为253亿美元，成本基础为98亿美元。
| 持股数* | 公司 | 持股比例 | 2017年12月31日 | |
| 成本** | 市值 | |||
| （单位：百万美元） | ||||
| 151,610,700 | 美国运通公司（American Express Company） | 17.6 | $ 1,287 | $ 15,056 |
| 166,713,209 | 苹果公司（Apple Inc.） | 3.3 | 20,961 | 28,213 |
| 700,000,000 | 美国银行（Bank of America Corporation） | 6.8 | 5,007 | 20,664 |
| 53,307,534 | 纽约梅隆银行（The Bank of New York Mellon Corporation） | 5.3 | 2,230 | 2,871 |
| 225,000,000 | 比亚迪股份有限公司（BYD Company Ltd.） | 8.2 | 232 | 1,961 |
| 6,789,054 | 特许通讯公司（Charter Communications, Inc.） | 2.8 | 1,210 | 2,281 |
| 400,000,000 | 可口可乐公司（The Coca-Cola Company） | 9.4 | 1,299 | 18,352 |
| 53,110,395 | 达美航空（Delta Airlines Inc.） | 7.4 | 2,219 | 2,974 |
| 44,527,147 | 通用汽车（General Motors Company） | 3.2 | 1,343 | 1,825 |
| 11,390,582 | 高盛集团（The Goldman Sachs Group, Inc.） | 3.0 | 654 | 2,902 |
| 24,669,778 | 穆迪公司（Moody’s Corporation） | 12.9 | 248 | 3,642 |
| 74,587,892 | 菲利普斯66（Phillips 66） | 14.9 | 5,841 | 7,545 |
| 47,659,456 | 西南航空（Southwest Airlines Co.） | 8.1 | 1,997 | 3,119 |
| 103,855,045 | 美国合众银行（U.S. Bancorp） | 6.3 | 3,343 | 5,565 |
| 482,544,468 | 富国银行（Wells Fargo & Company） | 9.9 | 11,837 | 29,276 |
| 其他 | 14,968 | 24,294 | ||
| 按市值计价的普通股总计 | $ 74,676 | $ 170,540 | ||
* 不包括伯克希尔子公司养老金计划持有的股份。
** 这是我们的实际购买价格，也是我们的计税基础；由于美国通用会计准则下的减记要求，某些情况下的GAAP“成本”有所不同。
表中的部分股票由与我共同管理伯克希尔投资的Todd Combs或Ted Weschler负责。他们各自独立管理超过120亿美元的资金；我通常是通过查看月度投资组合摘要来了解他们做出的决策。两人管理的250亿美元中，包括伯克希尔某些子公司超过80亿美元的养老金信托资产。如前所述，养老金投资不包含在上述伯克希尔持股表中。
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查理和我将伯克希尔持有的可流通普通股视为企业的权益，而非根据“图表”形态、分析师的“目标”价或媒体专家的意见来买卖的代码。相反，我们只是相信，如果被投资企业的业务成功（我们认为大多数都会成功），我们的投资也会成功。有时我们的回报会很小；偶尔收银机会响个不停。有时我也会犯下代价高昂的错误。总体而言——并且放眼长期——我们应该获得不错的回报。在美国，股权投资者是顺风而行的。
从我们的股票组合中——我们称之为多元化上市企业集团的“少数股权”——伯克希尔在2017年获得了37亿美元的股息。这个数字包含在我们的GAAP数据中，也包含在我们季度和年度报告中引用的“经营利润”中。
然而，这个股息数字远远低估了我们持股产生的“真实”收益。几十年来，我们一直强调在《股东相关业务原则》第六条（第19页）中，我们期望被投资企业的未分配利润能够通过后续的资本利得为我们带来至少等额的收益。
我们的资本利得（和亏损）的确认将是不均衡的，特别是当我们遵守新的GAAP规则，要求我们在收益中不断记录未实现利得或亏损时。但我有信心，被投资企业留存的收益，随着时间的推移，并且将被投资企业视为一个整体，最终将为伯克希尔带来相应的资本利得。
我刚才描述的价值积累与留存收益之间的联系，在短期内是无法察觉的。股票暴涨暴跌，看似与其内在价值的逐年积累毫无关联。然而，随着时间的推移，本·格雷厄姆常被引用的格言被证明是对的：“短期而言，市场是一台投票机；但长期而言，它是一台称重机。”
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伯克希尔本身就是一个生动的例子，说明短期价格的随机性如何掩盖长期的价值增长。在过去的53年里，公司通过将收益再投资并让复利发挥魔力来构建价值。年复一年，我们都在前进。然而，伯克希尔的股票却经历了四次真正的大幅下跌。以下是详细的惨状：
| 时期 | 最高 | 最低 | 百分比跌幅 |
|---|---|---|---|
| 1973年3月-1975年1月 | 93 | 38 | (59.1%) |
| 1987年10月2日-1987年10月27日 | 4,250 | 2,675 | (37.1%) |
| 1998年6月19日-2000年3月10日 | 80,900 | 41,300 | (48.9%) |
| 2008年9月19日-2009年3月5日 | 147,000 | 72,400 | (50.7%) |
| 下表为我的立场提供了最强有力的佐证——绝不要借钱买股票。股市短期内能跌到什么程度，没人说得准。即便你借的钱不多，仓位也没有因市场暴跌而立刻受到威胁，但令人心惊肉跳的头条新闻和喘不过气的评论报道，仍会让你的思绪陷入混乱。而思绪一旦乱了，就做不出好决策。 |
接下来的53年里，我们的股票（以及其他股票）还会像表中所列那样经历大跌。没人能告诉你这些跌幅什么时候出现。信号灯随时可能从绿灯直接跳到红灯，而不经过黄灯。
然而，当重大跌幅发生时，对于那些没有债务拖累的人来说，那恰恰是绝佳机遇。此时正该记起吉卜林《如果》中的这几行：
"如果在众人六神无主之时，你能镇定自若……
"如果你能等待，而不因等待而不耐烦……
"如果你能思考——而不让思考成为目的……
"如果所有人都怀疑你，你仍能自我坚信……
"那么，大地及其万物都属于你。"
"赌局"落幕，揭示意外投资教训
去年，在赌局进行到90%这个节点时，我向你们详细汇报了一笔我在2007年12月19日设下的十年赌约。（去年年报中的完整讨论已重印于第24-26页。）现在，我拿到了最终比分——从好几个方面来看，这结果都令人大开眼界。
我下这个赌注有两个原因：(1) 用我自掏腰包的318,250美元，撬动一笔不成比例的大额捐款——如果事情如我所料，这笔钱将在2018年初捐给奥马哈女孩公司（Girls Inc. of Omaha）；(2) 宣扬我的信念：我选的标的——一个几乎零成本的标普500指数基金（非主动管理）——长期来看，其业绩会跑赢绝大多数投资专业人士，无论那些"帮手"有多少光环、拿多少激励报酬。
搞清楚这个问题至关重要。美国投资者每年向理财顾问支付惊人的费用，而且往往还要承担好几层的大额成本。整体而言，这些投资者得到了与他们所付代价相符的价值吗？说得更直白一点，整体而言，投资者为这些开销换来了任何回报吗？
与我对赌的对手方，门徒合伙公司（Protégé Partners），选了五只"母基金（funds-of-funds）"，并预期它们能跑赢标普500。这不是一个小样本。那五只母基金本身又投资了超过200只对冲基金。
本质上，门徒——一家熟门熟路、深谙华尔街之道咨询公司——选了五位投资专家，而这五位专家又雇用了好几百位其他投资专家，每人各自管理自己的对冲基金。这个阵容堪称精英团队，充满了智慧、激情和自信。
那五只母基金的经理人还多了一个优势：在十年里，他们可以——也确实这样做了——重新调整自己的对冲基金组合，买入"新星"的基金，同时撤出那些经理人已失手、风光不再的对冲基金仓位。
门徒一方的每个参与者都获得了巨大的激励：无论是母基金经理人，还是他们选中的对冲基金经理人，都能从收益中分成相当大的一部分——即便是那些仅仅因为大盘上涨而赚到的钱也不例外。（自我们控股伯克希尔以来的43个十年期里，标普500上涨的年份100%地多于下跌的年份。）
需要强调指出的是，这些业绩激励奖金只是巨大而美味蛋糕上的一层糖霜：哪怕这些基金在十年里让投资者亏了钱，他们的经理人照样能变得极其富有。这是因为母基金投资者每年都要支付高得惊人的管理费，费率平均约为资产规模的2.5%，其中一部分进了五只母基金经理人的腰包，余下的部分则流向了底层200多只对冲基金的经理人。
以下是这场赌局的最终比分——
| 年份 | 母基金A | 母基金B | 母基金C | 母基金D | 母基金E | 标普指数基金 |
| 2008 | -16.5% | -22.3% | -21.3% | -29.3% | -30.1% | -37.0% |
| 2009 | 11.3% | 14.5% | 21.4% | 16.5% | 16.8% | 26.6% |
| 2010 | 5.9% | 6.8% | 13.3% | 4.9% | 11.9% | 15.1% |
| 2011 | -6.3% | -1.3% | 5.9% | -6.3% | -2.8% | 2.1% |
| 2012 | 3.4% | 9.6% | 5.7% | 6.2% | 9.1% | 16.0% |
| 2013 | 10.5% | 15.2% | 8.8% | 14.2% | 14.4% | 32.3% |
| 2014 | 4.7% | 4.0% | 18.9% | 0.7% | -2.1% | 13.6% |
| 2015 | 1.6% | 2.5% | 5.4% | 1.4% | -5.0% | 1.4% |
| 2016 | -3.2% | 1.9% | -1.7% | 2.5% | 4.4% | 11.9% |
| 2017 | 12.2% | 10.6% | 15.6% | N/A | 18.0% | 21.8% |
| 最终总回报 | 21.7% | 42.3% | 87.7% | 2.8% | 27.0% | 125.8% |
| 年化平均回报 | 2.0% | 3.6% | 6.5% | 0.3% | 2.4% | 8.5% |
注：根据我与Protégé Partners的协议，这些母基金的名字从未公开披露过。不过我从Protégé那里收到了它们的年度审计报告。母基金A、B、C的2016年数据与去年最初报告的数据相比略有修订。母基金D于2017年清算；其年化平均回报按运营的9年计算。
五只母基金开局迅猛——2008年每只都跑赢了指数基金。然后，屋顶塌了。在随后的9年里，每一年，所有母基金作为一个整体都落后于指数基金。
请允许我强调：十年间的股市表现完全正常。如果2007年底对投资"专家"们做一次调查，问他们对长期普通股回报的预测，他们的猜测平均值很可能接近标普500实际实现的8.5%。在那样的环境里赚钱本应是很容易的事。确实，华尔街的"帮手"们赚得盆满钵满。然而，在这一群体发财的同时，他们的许多投资者却经历了一个"失去的十年"。
业绩来了又走，费用永不落空。
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这场赌局还揭示了另一个重要的投资教训：尽管市场总体上是理性的，但偶尔也会干出疯狂的事。抓住那时出现的机会，并不需要大智慧、经济学学位，或者熟悉alpha、beta这类华尔街黑话。投资者真正需要的是：既能够无视群体的恐惧或狂热，又能专注于几条简单的基本面。此外，愿意在长时间内看起来毫无新意——甚至看起来像个傻瓜——也是至关重要的。
最初，Protégé和我各拿出自己那份100万美元最终赌注的钱，分别购买了面值50万美元的零息美国国债（有时称为"剥离债券"）。这些债券每人花了318,250美元——大约64美分买1美元面值——10年后到期支付50万美元。
顾名思义，我们购买的这些债券不付利息，但（由于折价购买）持有至到期可获得4.56%的年化回报。Protégé和我最初计划只是逐年统计回报，并在2017年底债券到期时将100万美元捐给获胜的慈善机构。
我们买入后，债券市场却发生了一些非常奇怪的事情。到2012年11月，这些债券——当时距离到期还有大约五年——以面值的95.7%出售。按这个价格，它们的年到期收益率不到1%。准确地说，是0.88%。
面对如此可怜的回报，我们的债券已经变成一个愚蠢——非常愚蠢——的投资，相比于美国股票。随着时间的推移，标普500指数——它按市值加权反映美国商业的广泛横截面——在股东权益（净资产）上的年回报率远高于10%。
2012年11月，当我们考虑这一切时，标普500的股息现金回报率为每年2.5%，大约是所持美国国债收益率的3倍。这些股息几乎肯定会增长。除此之外，构成标普500指数的公司还在留存巨额资金。这些企业将利用留存收益扩大经营，并且常常也会回购自己的股份。无论走哪条路，随着时间的推移，每股收益都会大幅增加。而且——自1776年以来一直如此——无论美国经济在某一刻遇到什么问题，它都会向前发展。
2012年末，面对债券与股票之间异常悬殊的估值差距，Protégé和我同意卖掉五年前买入的债券，用所得资金购买了11,200股伯克希尔的“B”股。结果：奥马哈少女公司（Girls Inc. of Omaha）上月收到了2,222,279美元，而不是它原本期望的100万美元。
需要强调的是，自2012年换仓以来，伯克希尔的表现并不亮眼。但亮眼并非必需：毕竟，伯克希尔的收益只需超过那区区年化0.88%的债券标杆——这几乎算不上什么赫拉克勒斯式的壮举。
从债券换到伯克希尔的唯一风险是，2017年底恰好碰上异常疲软的股市。Protégé和我认为这种可能性（永远存在）非常低。两个因素决定了这个结论：2012年末伯克希尔的价格合理，以及在这笔赌约剩余的五年里，伯克希尔几乎肯定会出现大规模资产积累。即便如此，为了消除换仓给慈善机构带来的所有风险，我同意如果在2017年底出售这11,200股伯克希尔股票所得低于100万美元，差额由我来补足。
投资是一种放弃今天的消费，以期未来获得更多消费的活动。“风险”是这一目标无法实现的可能性。
按照这个标准，2012年那些号称“无风险”的长期债券，其风险远高于长期投资于普通股。当时，即使2012年至2017年间每年1%的通货膨胀率，也会降低Protégé和我卖掉的那些国债的购买力。
我想迅速承认，在接下来的任何一天、一周甚至一年里，股票的风险都比短期美国国债高——甚至高得多。然而，随着投资者的投资期限拉长，一个多元化的美国股票组合的风险会逐渐低于债券——假设这些股票的买入价格是相对于当时利率水平的合理盈利倍数。
对于长期投资者——包括养老基金、大学捐赠基金和有储蓄意识的个人——来说，用投资组合中债券与股票的比例来衡量投资“风险”是一个可怕的错误。通常，投资组合中的高等级债券反而会增加其风险。
这次赌约的最后一个教训：坚持做重大而“简单”的决策，少折腾。十年赌约期间，参与其中的200多家对冲基金几乎肯定做出了数以万计的买入和卖出决策。这些经理人中的大多数无疑都深思熟虑过每一个决定，相信每个决定都能带来好处。在投资过程中，他们研读10-K财报、访谈管理层、阅读行业期刊，并与华尔街分析师交流。
而我和Protégé，既不依赖研究、洞察，也不靠天才，这十年间只做了一个投资决定。我们只是简单决定，以超过100倍收益的价格（95.7卖出价 / 0.88收益率）卖掉债券投资——这些“收益”在未来五年内不会增加。
我们卖掉债券，是为了把钱转入一只单一的证券——伯克希尔——而伯克希尔又持有一组多元化的优质企业。依靠留存收益的推动，即使经济表现平平，伯克希尔价值的年增长也不太可能低于8%。
经过这种幼儿园级别的分析后，我和Protégé进行了转换，然后放松下来，信心满满地认定，长期来看8%肯定跑赢0.88%。而且是大幅跑赢。
股东大会
股东大会将于5月5日举行，届时雅虎将再次进行网络直播，网址是 https://finance.yahoo.com/brklivestream 。网络直播将于中部夏令时间上午8点45分开始。雅虎将在会前和午休期间采访董事、经理、股东和名人。采访和会议都将同步翻译成普通话。
我们与雅虎的合作始于2016年，股东反响热烈。去年，实时观看人数增长了72%，达到约310万，短片回放总次数达1710万。
对于亲临现场参会的人，世纪连锁中心的大门将于周六上午7点开门，方便大家在8点30分股东电影开始前购物。问答环节将从9点15分持续到下午3点30分，中午12点休息一小时。最后，下午3点45分我们将开始正式的股东大会，通常持续15到45分钟。购物将于下午4点30分结束。
5月4日周五，伯克希尔在世纪连锁中心的展位将从中午12点开放到下午5点。我们在2015年增加了这个额外的购物时段，狂热的购物者非常喜欢。去年，周五开放的五小时里，约有1.2万人涌入大门。
您的购物场所将是一个194,300平方英尺的大厅，紧邻会场，来自我们几十家子公司的产品将在那里出售。（您的董事长不鼓励免费赠品。）请向许多亲自坐镇展位的伯克希尔经理人打个招呼。别忘了看看那幅精彩的BNSF铁路模型，它向我们的所有公司致敬。
我们的跑鞋公司Brooks将再次在大会上推出一款特别的纪念鞋。买一双后，周日穿着它们参加我们第六届“伯克希尔5公里”赛跑，比赛上午8点从世纪连锁中心出发。参赛详情将包含在《参观指南》中，该指南将与您的参会凭证一同寄出。参赛者会发现，他们身边奔跑的是许多伯克希尔的经理、董事和同事。（不过查理和我会睡个懒觉；就算穿上Brooks跑鞋，我们的成绩也会令人难堪。）参加5公里赛跑的人数逐年增加。帮我们再创个纪录。
在购物区，GEICO的展位将有来自全国各地的多位顶级保险顾问驻守。在去年的股东大会上，我们的保单销售创下了纪录，比2016年增长了43%。
所以不妨来要个报价。大多数情况下，GEICO 都能给你一个股东折扣（通常8%）。我们运营所在的51个司法管辖区中，有44个允许这个特惠。（补充一点：如果你有资格获得其他折扣，比如某些团体折扣，这个折扣不能叠加。）带上你现有保险的详细资料，来比比价格。我们能帮你们当中很多人省下真金白银。把这笔省下来的钱花在伯克希尔的其他产品上。
一定要去逛逛“书虫书店”。这家总部在奥马哈的零售商将带来40多种书籍和DVD，其中包含几本新书。伯克希尔的股东是书商的梦想：几年前《穷查理宝典》（没错，就是我们的查理）首次亮相时，我们在年会上卖出了3,500本。那本书重4.85磅。算一下：那天我们的股东离开会场时，相当于带走了大约8.5吨的查理智慧。
随这份报告附上的股东委托书附件，会说明如何获取参加年会及其他活动所需的凭证。记住，大部分航空公司在伯克希尔周末都会大幅提价。如果你从远方来，比较一下飞往堪萨斯城和奥马哈的票价。两城之间车程约2.5小时，飞堪萨斯城可能能帮你省不少钱。一对夫妇的出行费用能省下1,000美元甚至更多。省下来的钱，到我们这儿来花。
在内布拉斯加家具城（NFM），它位于72街、Dodge街和Pacific街之间的77英亩地块上，我们将再次推出“伯克希尔周末”折扣价。要在NFM享受伯克希尔折扣，你必须在5月1日（周二）至5月7日（周一）期间（含首尾两天）购物，并出示你的年会凭证。去年，该店一周的销售额惊人地达到了4,460万美元。在NFM，实体店依然活力十足。
这段期间的特惠价格甚至适用于几家知名制造商的产品，它们通常有铁一般的从不打折规则，但本着我们股东周末的精神，这次为你破了例。我们感谢它们的配合。“伯克希尔周末”期间，NFM周一至周六上午10点至晚上9点营业，周日上午11点至晚上8点营业。周六下午5:30至8:00，NFM将举办野餐会，欢迎各位光临。
NFM还将继续把股东折扣扩展到我们在堪萨斯城和达拉斯的分店。从5月1日到5月7日，向这些NFM门店出示年会凭证或其他伯克希尔持股证明（如券商对账单）的股东，将享受与奥马哈店相同的折扣。
在波仙珠宝，我们将再次举办两场股东专属活动。第一场是5月4日（周五）下午6点到9点的鸡尾酒招待会。第二场是5月6日（周日）上午9点到下午4点的主庆典。周六我们会营业到下午6点。记住，你买得越多，省得越多（或者像我女儿每次跟我逛店时说的那样）。
整个周末波仙珠宝都会人山人海。为了方便你购物，股东优惠价格将从4月30日（周一）持续到5月12日（周六）。在此期间，请出示你的年会凭证或显示你持有我们股票的券商对账单，以表明股东身份。
周日下午，在波仙珠宝楼上的楼层，我们有世界顶级桥牌大师 Bob Hamman 和 Sharon Osberg 坐镇，与我们的股东切磋牌技。如果他们提议赌一把，请转移话题。Ajit、Charlie、Bill Gates 和我很可能也会去逛逛。
我的好朋友邢延华（Ariel Hsing）周日也会来到会场，在乒乓球台前迎战挑战者。我认识她时才九岁——可那时我就一分都赢不了她。邢延华曾代表美国参加2012年奥运会。如果你不介意丢脸，那就从下午1点开始跟她过过招吧。去年比尔·盖茨和她打得相当不错，所以今年他可能准备好再次挑战了。（我的建议：押邢延华赢。）我只会以顾问身份参与，绝不上场。
Gorat's餐厅将在周日（5月6日）中午12点到晚上10点专门为伯克希尔·哈撒韦（Berkshire Hathaway）的股东开放。预订电话请在4月2日（但不要早于这一天）拨打402-551-3733。点一份配薯饼的T骨牛排，就能证明你是个老饕。
本次股东会的问答环节仍由三位财经记者主持，向查理和我提问股东通过电子邮件提交的问题。这三位记者及他们的邮箱是：Carol Loomis，她同时代最杰出的商业记者，邮箱 loomisbrk@gmail.com；CNBC的Becky Quick，邮箱 BerkshireQuestions@cnbc.com；以及《纽约时报》的Andrew Ross Sorkin，邮箱 arsorkin@nytimes.com。
每位记者会从收到的提问中选出六道他们认为对股东最有趣、最重要的问题。记者们告诉我，你的问题要满足以下条件才最有可能被选中：简洁、不要在最后一刻才提交、与伯克希尔相关，并且每封邮件不超过两个问题。（如果你希望提问时被提及姓名，请在邮件中注明。）
另外，跟踪伯克希尔的三位分析师也会提出一组问题。今年的保险业专家是Dowling & Partners的Gary Ransom。有关非保险业务的问题将由Ruane, Cunniff & Goldfarb的Jonathan Brandt和Morningstar的Gregg Warren提出。既然我们开的是股东大会，我们希望能听到分析师和记者提出那些能增进股东对投资理解与认知的问题。
查理和我对即将到来的问题一无所知。有些问题肯定会很刁钻——这正是我们喜欢的。不许提复合问题；我们想让尽可能多的提问者有机会发问。我们的目标是，当你离开股东大会时，对伯克希尔的了解比来时更多，并且在奥马哈度过愉快的时光。
总而言之，我们预计至少有54个问题：每位分析师和记者各提6个，现场观众提18个。在第54个问题之后，所有问题都来自现场观众。查理和我经常在下午3:30之前就回答了超过60个问题。
现场提问者将通过11次抽签选出，抽签将在年度股东大会当日上午8点15分进行。主会场和主要转播厅里各装有11支话筒，每一支话筒都会进行一轮抽签。
既然我谈到了股东获取知识的话题，请允许我提醒大家：查理和我认为，所有股东应该同时获得伯克希尔发布的新信息，并且在任何交易发生之前，最好还有足够的时间消化和分析这些信息。这就是为什么我们尽量在周五晚些时候或周六一早发布财务数据，也是为什么我们的年度股东大会总是在周六举行（这个日子也能缓解交通和停车问题）。
我们不采取与大机构投资者或分析师进行一对一交谈的常见做法，而是像对待所有其他股东一样对待他们。对我们来说，没有比那些将大部分储蓄托付给我们的中小股东更重要的了。在我日常经营公司——以及写这封信时——我心里想的正是这位股东。
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我经常有充分理由赞扬我们旗下运营经理的成就。他们确实是全明星，管理自己的企业就像那是他们家里唯一的资产。我还相信，我们的经理们拥有所能找到的最具股东导向的心态——在大型上市公司中也是如此。我们大多数经理没有经济上的工作需求，打出商业"全垒打"的喜悦对他们来说和薪水一样重要。
如果经理（或董事）持有伯克希尔的股票——很多人确实如此——那要么是他们通过公开市场购买所得，要么是他们在把企业卖给我们时获得的股份。然而，没有人能在不承担下行风险的情况下获得所有权的好处。我们的董事和经理与你们利益一致。
总部仍然有一支出色的团队。这个团队高效地处理大量SEC（美国证券交易委员会）和其他监管要求，提交一份32,700页的联邦所得税申报表，监督3,935份州税申报表的提交，回应无数股东和媒体询问，发布年报，筹备全国最大的股东大会，协调董事会活动，核实这封信的内容——任务清单无穷无尽。
他们愉快且令人难以置信高效地处理所有这些业务工作，让我的生活轻松愉快。他们的努力超出了严格与伯克希尔相关的活动：例如，去年他们接待了40所大学（从200个申请者中选出）的学生来奥马哈参加与我的一对一问答日。他们还处理我收到的各种请求，安排我的旅行，甚至为我准备午餐的汉堡和薯条（当然，要淋上亨氏番茄酱）。此外，他们在年度大会上随时帮忙做任何需要的事。他们为在伯克希尔工作感到自豪，我也为他们感到自豪。
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我把最好的留到最后。2018年初，伯克希尔董事会选举阿吉特·贾因（Ajit Jain）和格雷格·阿贝尔（Greg Abel）为伯克希尔董事，并分别任命为副董事长。阿吉特现在负责保险业务，格雷格监督我们其他业务。查理和我将专注于投资和资本配置。
你和我们有幸拥有阿吉特和格雷格为我们工作。他们每个人都在伯克希尔工作了几十年，伯克希尔的血液流淌在他们的血管里。每个人的品格与才华相匹配。这就说明了一切。
5月5日来奥马哈——资本主义的摇篮——见见伯克希尔团队。我们所有人都期待您的到来。
2018年2月24日
沃伦·E·巴菲特
董事会主席