2022 Berkshire Letter, Death Trap Provisions, ATM Industry

Welcome to the eighth Pari Passu newsletter,

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Today, we will learn more about:

1. Lessons from the 2022 Berkshire Hathaway letter

2. Death-trap provisions

3. Overview of the ATM Industry

Lessons from the 2022 Berkshire Hathaway letter

The easiest way to grow is to learn, and the easiest way to learn is to read. The annual letters of Berkshire provide an invaluable resource and I believe everyone should spend some time reading them. Below, you can find my notes from this year’s letter.

Capital at Berkshire is allocated between two related forms of ownership. [1] Businesses that Berkshire controls (usually buying 100% of each), directs capital allocation at these subsidiaries and selects the CEOs who make day-by-day operating decisions [2] Publicly-traded stocks through which are passively owned with no say in management.

One advantage of investing in publicly-traded segment is that – episodically – it becomes easy to buy pieces of wonderful businesses at wonderful prices. It’s crucial to understand that stocks often trade at truly foolish prices, both high and low. “Efficient” markets exist only in textbooks. In truth, marketable stocks and bonds are baffling, their behavior usually understandable only in retrospect. Controlled businesses are a different breed. They sometimes command ridiculously higher prices than justified but are almost never available at bargain valuations. Unless under duress, the owner of a controlled business gives no thought to selling at a panic-type valuation.

After talking about some great investments like Coca-Cola and American Express, Warren talks about the economics of stock buybacks and why they are beneficial (if done at the correct prices).

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