Warren Buffett, the genius investing mind behind the success of Berkshire Hathaway Inc. (NYSE: BRK.A; NYSE: BRK.B), released his annual letter to shareholders over the weekend whereby he and his right-hand man Charlie Munger both reflected upon the 50 years he has now spent at the head of the investment conglomerate. You can read more about that here.
Berkshire Hathaway
Berkshire Hathaway is the vehicle used by Warren Buffett to help him amass a sum of more than US$72 billion, according to Forbes, making him one of the most successful investors of all time.
Buffett takes an ultra-long term approach to investing. In fact, he once said: "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years." By applying that theory with companies including The Coca-Cola Company, IBM and American Express, the Buffett-led Berkshire Hathaway has helped thousands of investors around the world generate enormous returns over the decades.
Looking to the future
For some time, investors have been questioning what will happen when Buffett (aged 84) and Munger (aged 91) both put the business behind them. Buffett repeated that the Berkshire board had identified his successor as CEO, although that person's identity has not yet been revealed.
Buffett said: "Both the board and I believe we now have the right person to succeed me as C.E.O. – a successor ready to assume the job the day I die or step down… In certain important respects, this person will do a better job than I am doing."
Meanwhile, investors hoping for a share repurchase plan or a big dividend bonanza will have to wait a while longer (possibly 10-20 years). Until then, Buffett still believes Berkshire Hathaway can continue to amass greater returns by buying businesses and shares rather than distributing cash to shareholders.
Given the company's incredible track record, I'm certainly content with that decision, as are the majority of other shareholders. As quoted in the letter, "Nevertheless, (in response to last year's proxy motion requesting a dividend) 98% of the shares voting said, in effect, "Don't send us a dividend but instead reinvest all the earnings.""
The Australian Berkshire Hathaway
Although Buffett cautioned investors not to have unrealistic expectations for the company in the coming years, Berkshire Hathaway still represents a safe bet for investors' money given its size and fantastic diversification.
One way for Australians to gain a similar kind of exposure would be to purchase Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which many analysts have compared to Berkshire itself. Like Berkshire, Soul Patts is run by a world-class management team which takes an ultra-long term approach to investing. Amongst its biggest investments are Brickworks Limited (ASX: BKW), TPG Telecom Ltd (ASX: TPM) and New Hope Corporation Limited (ASX: NHC).
