Berkshire Hathaway 2008 Annual Report Download - page 17

Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood
using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often,
though, investors forget to examine the assumptions behind the symbols. Our advice: Beware of geeks bearing
formulas.
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A final post-script on BHAC: Who, you may wonder, runs this operation? While I help set policy, all
of the heavy lifting is done by Ajit and his crew. Sure, they were already generating $24 billion of float along
with hundreds of millions of underwriting profit annually. But how busy can that keep a 31-person group?
Charlie and I decided it was high time for them to start doing a full day’s work.
Investments
Because of accounting rules, we divide our large holdings of common stocks this year into two
categories. The table below, presenting the first category, itemizes investments that are carried on our balance
sheet at market value and that had a yearend value of more than $500 million.
12/31/08
Shares Company
Percentage of
Company
Owned Cost* Market
(in millions)
151,610,700 American Express Company .................... 13.1 $ 1,287 $ 2,812
200,000,000 The Coca-Cola Company ....................... 8.6 1,299 9,054
84,896,273 ConocoPhillips ............................... 5.7 7,008 4,398
30,009,591 Johnson & Johnson ........................... 1.1 1,847 1,795
130,272,500 Kraft Foods Inc. .............................. 8.9 4,330 3,498
3,947,554 POSCO ..................................... 5.2 768 1,191
91,941,010 The Procter & Gamble Company ................. 3.1 643 5,684
22,111,966 Sanofi-Aventis ............................... 1.7 1,827 1,404
11,262,000 Swiss Re .................................... 3.2 773 530
227,307,000 Tesco plc ................................... 2.9 1,326 1,193
75,145,426 U.S. Bancorp ................................ 4.3 2,337 1,879
19,944,300 Wal-Mart Stores, Inc. .......................... 0.5 942 1,118
1,727,765 The Washington Post Company .................. 18.4 11 674
304,392,068 Wells Fargo & Company ....................... 7.2 6,702 8,973
Others ...................................... 6,035 4,870
Total Common Stocks Carried at Market .......... $37,135 $49,073
*This is our actual purchase price and also our tax basis; GAAP “cost” differs in a few cases because of
write-ups or write-downs that have been required.
In addition, we have holdings in Moody’s and Burlington Northern Santa Fe that we now carry at
“equity value” – our cost plus retained earnings since our purchase, minus the tax that would be paid if those
earnings were paid to us as dividends. This accounting treatment is usually required when ownership of an
investee company reaches 20%.
We purchased 15% of Moody’s some years ago and have not since bought a share. Moody’s, though,
has repurchased its own shares and, by late 2008, those repurchases reduced its outstanding shares to the point
that our holdings rose above 20%. Burlington Northern has also repurchased shares, but our increase to 20%
primarily occurred because we continued to buy this stock.
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