(By the way, if you want one of those nifty Berkshire Hathaway hats like that you see in this post, go to Berkshire Wear. I receive no compensation if you do, not even a lousy beach towel.)
Here we go:
In 1977, Berkshire Hathaway made $22.54 per share in 1977 on $21,904,000 in operating earnings. Pretty good, yes?
One of the things you have to admire about Buffett is his no-dance honesty:
The textile business again had a very poor year in 1977. We have mistakenly predicted better results in each of the last two years. This may say something about our forecasting abilities, the nature of the textile industry, or both.
An entrepreneurial lesson comes when Buffett discusses the insurance business:
It is comforting to be in a business where some mistakes can be made and yet a quite satisfactory overall performance can be achieved. In a sense, this is the opposite case from our textile business where even very good management probably can average only modest results. One of the lessons your management has learned - and, unfortunately, sometimes re-learned - is the importance of being in businesses where tailwinds prevail rather than headwinds.
On securities investments made by Berkshire Hathaway's insurance companies, classic Buffett:
We select our marketable equity securities in much the same way we would evaluate a business for acquisition in its entirety. We want the business to be (1) one that we can understand, (2) with favorable long-term prospects, (3) operated by honest and competent people, and (4) available at a very attractive price. We ordinarily make no attempt to buy equities for anticipated favorable stock price behavior in the short term. In fact, if their business experience continues to satisfy us, we welcome lower market prices of stocks we own as an opportunity to acquire even more of a good thing at a better price.
Looking at this letter from 28+ years ago, what hits me is that Warren Buffett's style hasn't changed, and it's this consistency that has created the long-term success that Berkshire Hathaway shareholders have enjoyed.
Want to think like Warren Buffett? The lesson from '77 is to be consistent in your investing style, whether you are big enough to buy other companies or just buy shares of them on the open market.
Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, & Part 7, Part 8, Part 9, Part 10.