Warren Buffett began his annual letter to shareholders of Berkshire Hathaway by calling 2012 a “subpar” year.
The billionaire writes that Berkshire’s increase in book value failed to beat the S&P 500′s total return for just the ninth time in 48 years, up 14.4 percent to the index’s 16 percent.
Buffett says investors shouldn’t necessarily expect Berkshire to outperform in big winning years for the broader marker, but performance “is almost certain to be better” in down or flat years for the market, and it is worth adding that 14.4 percent is hardly a disastrous year.
“To date, we’ve never had a five-year period of underperformance, having managed 43 times to surpass the S&P over such a stretch,” he continues. “But the S&P has now had gains in each of the last four years, outpacing us over that period. If the market continues to advance in 2013, our streak of five-year wins will end.”
Buffett’s second lament of 2012 is one he quickly corrected in early 2013: Berkshire’s lack of a big acquisition.
“I pursued a couple of elephants, but came up empty-handed,” he says. Of course that reversed in a big way two weeks ago, when Berkshire and 3G Capital teamed up in a deal to buy ketchup-maker HJ Heinz for more than $23 billion.
Buffett had praise for his partners in the 50/50 joint venture. “We couldn’t be in better company.” he writes. “Jorge Paulo [Lemann] is a long-time friend of mine and an extraordinary manager.”
Of course, the question for Berkshire shareholders is whether Buffett is still chasing big game from his Omaha office. The answer is yes.
While the $12 billion the firm will pump into Heinz soaks up much of its 2012 earnings, the company continues to generate cash at a healthy pace. Buffett reports that he and partner Charlie Munger “have again donned our safari outfits and resumed our search for elephants”…
Read More: forbes.com
