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2000 Shareholder Letter

Published on 28 February 2001

· Value Investing

The original 2000 Shareholder letter can be found here (

Focus on Intrinsic Value

How many times have we mentioned this? But i guess it bears imprinting into every investor's head: At the end of the day, we are buying into actual real-cashflow-producing businesses, and the only hallmark of a good business, is that it will continue to produce more and more revenue in the future.

Charlie and I continue to aim at increasing Berkshire’s per share value at a rate that, over time, will modestly exceed the gain from owning the S&P 500

And this is a good aim for any small individual investors - by following the rules and principles of value-investing, it is very likely that you will see good returns over the long run, much better than any index that doesn't care about value.

Back to Basics: $1 invested now should bring in >$1 in the future

At the end of the day, most businesses will require some kind of capital expenditure or input. It's very difficult to create a business that generates revenue without any kind of capital input or expenditure (let me know if you find one). Hence, common-sense dictates that if the business requires $1 to be used in pursuit of future revenues, then it will only make business sense to invest that $1 today if the future revenue it generates, discounted to today's value, is more than $1.

Indeed, growth can destroy value if it requires cash inputs in the early years of a project or enterprise that exceed the discounted value of the cash that those assets will generate in later years. Market commentators and investment managers who glibly refer to "growth" and "value" styles as contrasting approaches to investment are displaying their ignorance, not their sophistication.

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