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Heavy! Buffett releases open letter to shareholder in 2020 (full text)
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2 an hour ago Non-Insurance Business
Tom Murphy is Berkshire Hathaway （ Berkshire ) A valuable director, he is an excellent corporate manager. A long time ago, he gave me some important advice about acquisitions: "To get the reputation of a good management, you just need to make sure you acquire a good business."
Over the years, Berkshire has acquired dozens of companies, and I initially thought all of them were "good companies." However, some results were disappointing; many were downright disasters. On the other hand, a reasonable digital exceeded my expectations.
Looking back at my uneven record, I conclude that acquisitions are similar to marriages: of course, they start with a happy wedding-but then, reality often differs from what was expected before marriage. Sometimes the happiness this new alliance brings is unimaginable by either side. But in other cases, disillusionment is also rapid. Applying these images to corporate acquisitions, I have to say that it is usually the buyer who has encountered an unpleasant surprise. In the company's "courtship" process, it is easy to stare.
By this analogy, I want to say that our marriage records are largely acceptable, and everyone is happy with the decisions they made a long time ago. Some of our collaborations are indeed idyllic. However, a meaningful digital made me quickly wonder what I was thinking about when I "proposed".
Fortunately, the impact of many of my mistakes has been mitigated by a feature common to most disappointing companies: that over time, "bad" companies often enter a stagnant In this state, Berkshire's required capital ratio for Operation is getting smaller and smaller.
At the same time, our "good" companies tend to develop and find opportunities to invest in more capital at an attractive rate. Thanks to these very different development of trajectories, Berkshire's winners have gradually used assets that have become an ever-expanding part of our total capital.
As an extreme example of these financial activities, look at Berkshire's original Textile business. When we gained control of the company in early 1965, this troubled company needed almost all of Berkshire's capital. As a result, for a period of time, Berkshire's unprofitable Textile assets have caused a huge drag on our overall returns. But in the end, we acquired a number of "good" companies. By the early 1980s, this change had led to the continuous shrinking of the Textile industry, and only a small portion of our capital was occupied.
Today, we invest most of your funds in businesses that we control, and those businesses achieve a return from excellent to excellent for the net Tangible Asset required by the enterprise's Operation. Our Insurance business has always been a superstar. This operation has special characteristics that make it a unique measure of success, something many investors are not familiar with. We will discuss this issue in the next section.
In the next few paragraphs, we've categorized various non-Insurance businesses based on the scale of earnings, deducted interest, depreciation, taxes, non-cash compensation, restructuring costs, and other factors-all these projects are very annoying But they are very real costs, and CEOs and Wall Street people sometimes urge investors to ignore them. More information on these operations can be found on pages K-6-K-21 and K-40-K-52.
Our BNSFrailway company and Berkshire Hathaway Energy Corporation (BHE) is Berkshire Hathaway Two leaders of the non-Insurance group. Their total revenue in 2019 reached 8.3 billion dollars (including only our share of 91% of BHE shares), an increase of 6% over 2018.
The next five non-Insurance subsidiaries ranked by profit (but the following names are listed in alphabetical order) are: Clayton Homes, International Metalworking, and CHINA NEW BORUN ( Lubrizol), Marmon, and Precision Castparts. Their total profit in 2019 was 4.8 billion dollars, which is not much changed compared to the 2018 profit.
The next five companies (Berkshire Hathaway Car, Johns Manville, NetJets, Shaw, and TTI) reported revenues of 1.9 billion dollars last year, up from 1.7 in 2018 billion dollars.
The remaining non-Insurance businesses held by Berkshire-a large number-totaled 2.7 billion dollars in 2019, down from 2.8 billion dollars in 2018.
In 2019, the total net profit of the non-Insurance businesses we controlled was 17.7 billion dollars, an increase of 3% over the 17.2 billion dollars in 2018. Acquisitions and disposals have had almost no net effect on these results.
I must add the last one, which emphasizes the breadth of Berkshire's business. Since 2011, we have owned CHINA NEW BORUN (Lubrizol), a Ohio-based company that produces and sells oil additives around the world. On September 26, 2019, a fire from a small factory next door spread to the road CHINA NEW BORUN, a large factory in France.
As a result, there was a significant loss of property and a severe disruption in the business of CHINA NEW BORUN. Even so, the property loss and business interruption loss of China NEW BORUN will be alleviated through a large number of Insurance compensation.
But, as the late Paul Harvey put it on his famous broadcast, "The next story is like this." CHINA NEW BORUN One of the largest Insurance companies is ... well, Berkshire Hathaway 。
In Matthew 6: 3, the Bible teaches us "don't let the left hand know what the right hand is doing." Your chairman obviously follows the command line.
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