Berkshire Hathaway 2004 Annual Report Download - page 17

Investments
We show below our common stock investments. Those that had a market value of more than $600
million at the end of 2004 are itemized.
12/31/04
Percentage of
Shares Company Company Owned Cost* Market
(in $ millions)
151,610,700 American Express Company ................... 12.1 $1,470 $ 8,546
200,000,000 The Coca-Cola Company ........................ 8.3 1,299 8,328
96,000,000 The Gillette Company ............................. 9.7 600 4,299
14,350,600 H&R Block, Inc....................................... 8.7 223 703
6,708,760 M&T Bank Corporation .......................... 5.8 103 723
24,000,000 Moody’ s Corporation .............................. 16.2 499 2,084
2,338,961,000 PetroChina “H” shares (or equivalents)... 1.3 488 1,249
1,727,765 The Washington Post Company .............. 18.1 11 1,698
56,448,380 Wells Fargo & Company......................... 3.3 463 3,508
1,724,200 White Mountains Insurance..................... 16.0 369 1,114
Others ...................................................... 3,531 5,465
Total Common Stocks ............................. $9,056 $37,717
*This is our actual purchase price and also our tax basis; GAAP “cost” differs in a few cases
because of write-ups or write-downs that have been required.
Some people may look at this table and view it as a list of stocks to be bought and sold based upon
chart patterns, brokers’ opinions, or estimates of near-term earnings. Charlie and I ignore such distractions
and instead view our holdings as fractional ownerships in businesses. This is an important distinction.
Indeed, this thinking has been the cornerstone of my investment behavior since I was 19. At that time I
read Ben Graham’ s The Intelligent Investor, and the scales fell from my eyes. (Previously, I had been
entranced by the stock market, but didn’ t have a clue about how to invest.)
Let’ s look at how the businesses of our “Big Four” – American Express, Coca-Cola, Gillette and
Wells Fargo – have fared since we bought into these companies. As the table shows, we invested $3.83
billion in the four, by way of multiple transactions between May 1988 and October 2003. On a composite
basis, our dollar-weighted purchase date is July 1992. By yearend 2004, therefore, we had held these
“business interests,” on a weighted basis, about 12½ years.
In 2004, Berkshire’ s share of the group’ s earnings amounted to $1.2 billion. These earnings might
legitimately be considered “normal.” True, they were swelled because Gillette and Wells Fargo omitted
option costs in their presentation of earnings; but on the other hand they were reduced because Coke had a
non-recurring write-off.
Our share of the earnings of these four companies has grown almost every year, and now amounts
to about 31.3% of our cost. Their cash distributions to us have also grown consistently, totaling $434
million in 2004, or about 11.3% of cost. All in all, the Big Four have delivered us a satisfactory, though far
from spectacular, business result.
That’ s true as well of our experience in the market with the group. Since our original purchases,
valuation gains have somewhat exceeded earnings growth because price/earnings ratios have increased. On
a year-to-year basis, however, the business and market performances have often diverged, sometimes to an
extraordinary degree. During The Great Bubble, market-value gains far outstripped the performance of the
businesses. In the aftermath of the Bubble, the reverse was true.
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