You want a primer on how to run a conglomerate? You want to know how insurance works, how manufacturing and finance intertwine and how buying whole companies can be exceedingly lucrative if left alone? Do you want to know how to invest in stocks the right way and the wrong way? Then go punch up Warren Buffett's annual letter released this morning.
The first thing you notice is an overarching measurement of performance vs. several benchmarks. The rigor here, as always, is tremendous.
Then, because insurance is a principal way that Buffett makes money, there is an inordinate amount of insight given to this business. It's boring, it's methodical and it's the guts of Berkshire Hathaway (BRK.A, BRK.B).
Buffett then writes about a host of his businesses, including a brutal excoriation of how poorly Burlington Northern performed vs. the far-better-run Union Pacific (UNP). I sure wouldn't want to work there this morning. I was surprises that Buffett mentions nothing to speak of about Burlington and oil, given what will most likely be a big slowdown in a hugely-important cargo.
Buffett then gives you an analysis of his Big Four portfolio holdings: American Express (AXP), IBM (IBM), Coca-Cola (KO) and Wells Fargo (WFC).
I found this section deeply wanting.
First, American Express if the biggest disappointment in the Dow Jones Averages this year. That's because it lost a key contract with Costco (COST) that was responsible for an astounding 75 cents worth of earnings. It also lost a key lawsuit against the U.S. government on monopolistic practices. Neither is addressed. I don't know at what time this letter is put to bed, but I would have dealt with these issues.
IBM? What can I say? This stock was the worst-performing stock in the Dow last year. I would have put some color into why this one is still worth holding given the disappointment. Maybe Becky Quick will ask him on Monday's three-hour "Squawk Box" special.
I have no qualms with Wells Fargo. My Charitable Trust owns it. I do have issues with Coca-Cola, where there were questions about management's alignment with shareholders. It would have been good to weigh in.
Then there's a very harsh remonstration of a failed investment in Tesco that cost the company more than $400 million. It is tough to read because the reason Buffett gives for letting this situation turn into a loss was a lack of a sense of urgency in his examination of the holding. Ouch.
Finally, there is nothing in here about the gigantic Exxon (XOM) position that came and went? What was that all about? Inquiring minds sure would like to know. Buffett doesn't boot easily. So what the heck happened? I would have loved some oil commentary.
The letter then has a splendid history of Berkshire, befitting the 50th anniversary, with why Buffett has been so successful. It is a welcome primer and an excellent lesson in portfolio management over a multi-year timeframe.
All in all, it's a great read. And one that should intrigue people who want to know who this man is that we revere and the company he built and why we recognize his investment acumen as the greatest of all time.