Tin Can Robot

2012 Berkshire Hathaway Letter

The 2012 letter to Berkshire Hathaway shareholders from Warren Buffett has been released and his estimation is that he didn’t have such a good year:

When the partnership I ran took control of Berkshire in 1965, I could never have dreamed that a year in which we had a gain of $24.1 billion would be subpar, in terms of the comparison we present on the facing page.

But subpar it was. For the ninth time in 48 years, Berkshire’s percentage increase in book value was less than the S&P’s percentage gain (a calculation that includes dividends as well as price appreciation). In eight of those nine years, it should be noted, the S&P had a gain of 15% or more. We do better when the wind is in our face.

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

You should note that the reasons cited for the subpar year is because Berkshire has underperformed S&P for only the ninth times in 48 years and will likely end a 43 period streak of outperforming the S&P over five years (which, if you can’t tell, is still awfully darn good). Jeff Mathews points out why this is the best part of Buffett’s letter.