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50 Years - True Masters

Feb. 28, 2015 7:33 PM ETBRK.A
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It was January of 2000 and my 401K Technology fund had swelled to over 60% of my total assets. I had just read an article in Fortune about how Warren Buffett basically pulled the punch bowl from the party at one of those Vail gatherings by telling everyone, "this time isn't different".

I was all in. I sold all of my Technology fund shares and bought Berkshire B shares. Fast forward fifteen years later, I realize that my recognition in that moment generated a lot of wealth for me.

Reading the annual letter this year was so enjoyable for two reasons. One is the appreciation of two wickedly smart investors sharing their wisdom for all to have, free of charge. Two, I found that I really didn't learn much new. In my 15 years as a Berkshire owner, I've collected these bits of wisdom along the way. I am no longer an apprentice but more a skilled practitioner of their way.

So, I share my favorite bits from this year's letter.

1)I believe the chance of any event causing Berkshire to experience financial problems is essentially zero. We will always be prepared for the thousand-year flood; in fact, if it occurs we will be selling life jackets to the unprepared. Berkshire played an important role as a "first responder" during the 2008-2009 meltdown, and we have since more than doubled the strength of our balance sheet and our earnings potential. Your company is the Gibraltar of American business and will remain so.

If things get bad, they truly will be the last man standing and that is why I don't even blink with 40% of my assets in this one position.

2)Eventually - probably between ten and twenty years from now - Berkshire's earnings and capital resources will reach a level that will not allow management to intelligently reinvest all of the company's earnings. At that time our directors will need to determine whether the best method to distribute the excess earnings is through dividends, share repurchases or both. If Berkshire shares are selling below intrinsic business value, massive repurchases will almost certainly be the best choice. You can be comfortable that your directors will make the right decision.

This will create a conundrum for many out there. Buffett doesn't hate dividends for dividends sake. It just has to make logical sense. I love this.

2a)Not surprisingly, the A shares - owned by relatively few shareholders, each with a large economic interest - voted "no" on the dividend question by a margin of 89 to 1.

Proud to be a part of this!

3) From Munger: How did Berkshire happen to get a corporate personality so different from the norm?

Well, Buffett, even when only 34 years old, controlled about 45% of Berkshire's shares and was completely trusted by all the other big shareholders. He could install whatever system he wanted. And he did so, creating the Berkshire system.

Picture a bell curve. Most corporations make decisions from the middle of the bell curve (committees, average CEO's etc.). Berkshire made decisions from three, four, maybe six sigma intelligence without watering it down.

So much more, what fun, but I will stop there. Congratulations to the two greatest investors of my lifetime. You have made my life so much better by knowing you.

Analyst's Disclosure: The author is long BRK.A.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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