One of the best shareholder letters provided to investors is the one from Chris Bloomstran at Semper Augustus Investments (SAI). In his latest 2019 year end letter he provided an incredibly detailed fifty plus page analysis on Berkshire Hathaway with topics including:
- BERKSHIRE HATHAWAY: THE SKY IS FALLING 69
- Interval Training 70
- Above the Fold 75
- Bye-Bye Book Value 77
- If a Tree Falls in the Forest 80
- The Fumblerooskie 85
- The Dual Yardsticks of Intrinsic Value 86
- Book Value Receives a Complement 87
- Oh, What a Night 91
- Berkshire Hathaway: Ten-Year Expected Return 94
- Estimating Fourth Quarter and Full-Year GAAP Net Income and Change in Book Value 96
- Berkshire Hathaway Intrinsic Value Update 101
- GAAP Adjusted Financials Approach 102
- Other Methods for Valuing Berkshire 115
- Sum of the Parts Basis 116
- Simple Price to Book Value Basis 121
- Two-Pronged Approach 122
According to their latest 13F, SAI has a significant concentration of its portfolio in Berkshire Hathaway Class B shares (187,771), at a market value of $42,530,000.
One section from the letter that caught our eye is titled – Dropping Dimes – Can a Dividend be a Mistake?, which might help to explain why Berkshire is reluctant to pay dividends saying:
Berkshire paid a $0.10 per share dividend to shareholders on January 3, 1967. What’s a dime of Berkshire worth today? The lone dime dividend was a mere 0.54% yield on the $17.87 stock price. Had Berkshire not paid the $101,755 dividend, the retained dividend would be worth $3.1 billion today.
The $0.10 dividend was the only dividend ever paid by current management. We know Berkshire can’t compound at anywhere near its rate since 1967, but at 10% the same 54 basis point dividend grows to $484 billion in another 53 years. Next time someone clamors for a dividend from Omaha, tell them to drop a dime in a payphone and call 911.
You can read the entire letter here – Semper Augustus 2019 Annual Letter.
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