1. Berkshire book value increased by 14.4% in 2012, compared with the 16% total gain of S&P 500. For the years from 1965 to 2012 (48 years), Berkshire book value gained 19.7% a year, while the S&P 500 gained 9.4% a year.
2. Berkshire may lose its 43-time streak of beating the S&P500 in any 5-year period. “If the market continues to advance in 2013, our streak of five-year wins will end.” Buffett wrote: “We do better when the wind is in our face.”
3. Berkshire spent $1.3 billion to buy back shares. Buffett would buy back if the shares are traded below 120% of the book value.
4. Berkshire unable to make big acquisitions in 2012.
5. Berkshire’s five most profitable non-insurance companies (BNSF, Iscar, Lubrizol, Marmon Group and MidAmerican Energy) earned $10.1 billion, about $600 million more than in 2011, and beat Buffett’s expectations.
6. Buffett does not expect U.S. economy tanks in 2013
7. Berkshire had an underwriting gain of $1.6 billion on $73 billion of float.
8. Geico’s market share has grown from 2.5% in 1995 to 9.7% in 2012. “Much more growth lies ahead.”
9. Investment manager Todd Combs and Ted Weschler beat the S&P 500 by double-digit margins. They each now manage $5 billion.
10. Berkshire’s ownership interest in all four companies (American Express (NYSE:AXP), Coca-Cola (NYSE:KO), IBM (NYSE:IBM) and Wells Fargo (NYSE:WFC)) is likely to increase in the future. They have total of $26.7 billion of unrealized gain at yearend. Berkshire received $1.1 billion of dividends from those shares.
11. Berkshire per-share investments increased 15.7% to $113,786, and per-share pre-tax earnings from businesses other than insurance and investments also increased 15.7% to $8,085.
12. Total revenue of non-insurance business was $83 billion and net earnings is $3.7 billion (non-GAAP)
13. “More than 50 years ago, Charlie told me that it was far better to buy a wonderful business at a fair price than to buy a fair business at a wonderful price. Despite the compelling logic of his position, I have sometimes reverted to my old habit of bargain-hunting, with results ranging from tolerable to terrible. Fortunately, my mistakes have usually occurred when I made smaller purchases. Our large acquisitions have generally worked out well and, in a few cases, more than well.”
14. Berkshire’s equity holdings cost $49.796 billion. They are valued at $87.66 billion on Dec. 31, 2012 in stock market.
15. Acquired 28 daily newsletters at a cost of $344 million in the past 15 months. Why? “Newspapers continue to reign supreme, however, in the delivery of local news. If you want to know what’s going on in your town – whether the news is about the mayor or taxes or high school football – there is no substitute for a local newspaper that is doing its job.”
16. Dividends: For the cash generated by business, the best use is to reinvest in the business, then make acquisitions, then buy back shares at below intrinsic values. The last option is paying dividends.
17. Berkshire has $42 billion of cash as Dec. 31, 2012, this is an increase of $9 billion from a year ago.
18. Berkshire has a total share equity of $191 billion. With 1,651,294 shares outstanding, per share book comes to $116,023. As of Friday, per A-share is traded at $153,265, which is 132% of the book value.
Here is the complete shareholder letter.