And he likes what he sees.
Carol Loomis, the former Fortune editor, Berkshire confidante, shareholder and pro bono editor of his annual letter to shareholder, writes at Fortune.com that for the first time this year, in addition to a retrospective on the company, Buffett included statistics on the historical record of Berkshire's stock price over the years, and not just Berkshire's book value per share.
The results, as you might expect, are impressive.
Berkshire's stock has increased by a whopping 1,826,163% over the last 50 years, compared to a gain of just 11,196% for the S&P 500. On a compound basis, Berkshire's stock has increased 21.6% annually, while the company's book value has climbed 19.4%. Both are more than double the 9.9% annual gain in the S&P, including dividends.
In his letter, Buffett writes that while stock prices have their limitations in the short term, over time, "stock prices and intrinsic value almost invariably converge." And as Berkshire's business has evolved to owning and operating large businesses and not just investing in them, looking at how investors value Berkshire overall has more significance.
Consequently, Buffett writes that in his view and that of Charlie Munger, Berkshire's vice chairman, "the increase in Berkshire's per-share intrinsic value over the past 50 years is roughly equal to the 1,826,163% gain in market price of the company's shares"
Loomis reveals that Buffett initially did not want to include the overall gain figure in his remarks, although it was always going to be in the performance table. Doing so, Loomis writes "would have seemed like, well, bragging." But leaving it out rendered a previous paragraph nonsensical, so Buffett relented and put the number in.
Buffett admits that not all his recent investments were good ones, singling out Berkshire's 2009 acquisition of BNSF, the big railroad company, as disappointing. Still, he notes that the combined pretax earnings for BNSF and Berkshire Hathaway Energy climbed 11% in 2014.
By the end of 2014 the company had $63 billion as a result of the float from its insurance company holdings--from premiums not yet paid out in claims--and a failure to make what Buffett sometimes refers to as an "elephant acquisition," Loomis writes.
But Loomis writes that this hoard of cash is not a sign of failure since Buffett likens cash for a business to oxygen for individuals, calling it out of mind when it's present but "the only thing in mind when absent."
This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.