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2018 Shareholder Letter

Published on 23 February 2019

· Value Investing

The original 2018 Shareholder letter can be found here (

Focus on what's real, and what's accounting.

Immediately in the first page, WB repeated his point that it's very crucial to understand what's real and what's not real in "accounting land". The paper value of your securities/portfolio will fluctuate, sometimes wildly, but you should not take that as a direct indicator of your ability. Whether a business continues to make sense or not, really depends on what's real: is it making money, how's its operating earnings, how's its debts etc. Here, WB repeats:

Our advice? Focus on operating earnings, paying little attention to gains or losses of any variety.

The Prime Directive

Following which, WB re-emphasises his primary criterion (you would have seen this multiple times), and which we focus on at BTS as well. Over years, WB has focused on the 3 main things: well-managed businesses (which depends on able and honest and competent managers), durable economic characteristics (some call it moat, some call it competitive advantage etc) and buying the business at a good price. Of course all these requires YOU, the investor, to understand the business:

our prime goal in the deployment of your capital: to buy ably-managed businesses, in whole or part, that possess favorable and durable economic characteristics. We also need to make these purchases at sensible prices.

Investing is not a function of market

Later on, WB emphasises another important point, which is worth bearing in mind as we go along our journey. You CANNOT predict how the market is going to behave tomorrow or next month or next year. This is not something any human can do. What we CAN do, is to focus on understanding whether the business is worth more or less than its current market price.

My expectation of more stock purchases is not a market call. Charlie and I have no idea as to how stocks will behave next week or next year. Predictions of that sort have never been a part of our activities. Our thinking, rather, is focused on calculating whether a portion of an attractive business is worth more than its market price.

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