巴菲特1986年致股东的信（英文版）

Here is the full text of Warren Buffett's 1986 letter to shareholders:

Our net worth increased by $492.5 million during 1986, or 26.1%. Over the last 22 years (that is, since present management took over), book value has grown from $19.46 per share to $2,073.06, a rate of 23.3% compounded annually.

We had good news to report last year: The gain in Berkshire's intrinsic value during 1986 should have exceeded the gain in book value. I say "should have" because intrinsic value is a matter of judgment, and two people - even Charlie and I, who have extensive knowledge about our various businesses - may differ by a fair amount, say 10% or more, in their estimates of intrinsic value.

It's now been a decade since we purchased the Buffalo News. The investment has given us far more than we expected, both in financial returns and in intangibles. Our admiration for the paper and its management, led by Murray Light, has grown steadily since the day we bought it. Murray has made the paper an integral part of the Buffalo community. The stamina that he and his team showed during the paper's difficult early years and legal battles has not waned as the company has prospered. Charlie and I are deeply grateful to them.

Each year I list in the annual report the conditions we look for in a business we would like to buy. Last year we finally got a response. On January 5, I received a letter from a long - time shareholder, Bob, who is chairman of Fechheimer Brothers Company. I had not known Bob or his company before. In his letter, he said his company fit our criteria and suggested we meet. So, after receiving their annual report, we got together in Omaha.

As it turned out, Fechheimer was exactly the kind of company we like to buy. It has a long history, talented managers, high character, and people who love their work and want to share in the company's success. We quickly agreed to buy 84% of the company for about $46 million. This was similar to our purchase of Nebraska Furniture Mart (NFM). In both cases, the major shareholders had a need for cash, the existing management wanted to continue running the business and retain some ownership, and they wanted a buyer who would not sell the company for a quick profit and would leave the business undisturbed. These two companies are exactly the type we like to invest in, and they have found a good home with us.

We had 450 shareholders attend last year's annual meeting (versus about 250 the year before and only a dozen or so ten years ago). I hope you will all come to Omaha on May 19 for this year's meeting. Charlie and I will be happy to answer all your questions about the company's operations. Last year, shareholders asked a total of 65 questions, many of which were very good. After the meeting, two shareholders from New Jersey and New York each bought a $10,000 - worth of carpets from Mrs. B at Nebraska Furniture Mart for $5,000. Mrs. B was very happy but not entirely satisfied. So, after this year's meeting, she will be waiting for you at the store. I hope you can beat last year's record. Otherwise, I might be in trouble. So, please do me a favor and stop by to see her.

For a long - term investor like Berkshire, the two main tasks are to attract and retain outstanding managers and to handle the allocation of capital2.

Usually, the managers came with the companies we bought, having demonstrated their talents throughout careers that spanned a wide variety of business circumstances2. Our main contribution has been to not get in their way2. Managers who are independently wealthy are no problem because they relish the thrill of outstanding performance and find all aspects of their business absorbing2. They unfailingly think like owners, which is the highest compliment Charlie and I could pay a manager2.

We subscribe to the philosophy of Ogilvy & Mather's founding genius, David Ogilvy: "If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But, if each of us hires people who are bigger than we are, we shall become a company of giants." When you have able managers of high character running businesses about which they are passionate, you can have a dozen or more reporting to you and still have time for an afternoon nap. We intend to continue our practice of working only with people whom we like and admire. This policy not only maximizes our chances for good results but also ensures us an extraordinarily good time. On the other hand, working with people who cause your stomach to churn seems much like marrying for money - probably a bad idea under any circumstances, but absolute madness if you are already rich.

Capital allocation at Berkshire was tough work in 19862. We made one small business acquisition, utilizing only about 2% of Berkshire's net worth, and had no new ideas in the marketable equities field, an area in which, only a few years ago, we could readily employ large sums in outstanding businesses at very reasonable prices2. So, our main capital allocation moves in 1986 were to pay off debt and stockpile funds2. Neither is a fate worse than death, but they do not inspire us to do handsprings either2.

We had no new ideas in the marketable equities field because the stock market was overvalued. As this is written, little fear is visible in Wall Street. Instead, euphoria prevails - and why not? What could be more exhilarating than to participate in a bull market in which the rewards to owners of businesses become gloriously uncoupled from the plodding performances of the businesses themselves. Unfortunately, however, stocks can't outperform businesses indefinitely.

We don't try to anticipate the arrival or departure of market aberrations caused by fear and greed. Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

Regarding bonds, at best, they are mediocre investments. They simply seemed the least objectionable alternative at the time we bought them, and still seem so. (Currently liking neither stocks nor bonds, I find myself the polar opposite of Mae West as she declared: "I like only two kinds of men - foreign and domestic.")

Here's a little quiz: The table below shows the 1986 profit statements of two companies. Which company is more valuable?

As you've probably guessed, Company O and Company N are the same business - Scott Fetzer. In the "O" (for "old company") column, we show the GAAP earnings of Scott Fetzer as they would have been if we hadn't acquired the company. In the "N" (for "new company") column, we show the GAAP earnings of Scott Fetzer as actually reported by Berkshire.

It's important to emphasize that both columns describe the same economic situation - the same sales, wages, taxes, and so on. And both companies generated the same amount of cash for investment. The only difference is in the accounting methods.

So, which set of numbers should managers and investors focus on?

Before answering these questions, let's look at what causes the difference between Company O and Company N. In some respects, we'll simplify the discussion, but this simplification shouldn't affect the analysis or conclusion.

The difference between Company O and Company N arises because we paid a price for Scott Fetzer that was different from the net asset value on its books. Under GAAP, this difference (either a premium or a discount) must be accounted for through "purchased - price adjustments." In the case of Scott Fetzer, we paid $315 million for its net assets, which were recorded on its books at $172.4 million. So, we paid a premium of $142.6 million.

The first step in accounting for the premium is to adjust the carrying value of current assets to their fair market values. In practice, this requirement usually doesn't affect accounts receivable, which are routinely carried at fair value, but it does affect inventories. Due to a $22.9 million LIFO (Last - in, First - out) reserve and other accounting items, Scott Fetzer's inventory account was understated by $37.3 million compared to its fair market value. So, as our first accounting step, we used $37.3 million of the $142.6 million premium to increase the carrying value of inventories.

After adjusting current assets, if there is still a premium remaining, the next step is to adjust fixed assets to their fair market values. In our case, this adjustment required several accounting techniques related to deferred taxes. Since this is a simplified discussion, I'll skip the details and show you the bottom line: We added $68 million to fixed assets and eliminated $13 million from the deferred tax liability. After this $81 million adjustment, we still had $24.3 million of the premium left to allocate. If necessary, two more steps would be taken: adjusting intangible assets other than goodwill to their fair market values and revaluing liability accounts, which usually only affects long - term debt and unfunded pension liabilities. However, in the case of Scott Fetzer, neither of these steps was necessary.

After recording the fair market values of all assets and liabilities, the last accounting adjustment we need to make is to allocate the remaining premium to the goodwill account (technically called "excess of cost over fair value of net assets acquired"). The remaining premium totaled $24.3 million. So, Scott Fetzer's balance sheet before the acquisition (summarized in the O column) was transformed through the acquisition into the balance sheet shown in the N column. In reality, both balance sheets describe the same assets and liabilities, but as you can see, some of the numbers are quite different.

The higher asset values shown in the N column result in lower earnings in the N column of the income statement, due to the write - up of assets and the fact that some of the written - up assets must be depreciated or amortized. The higher the asset values, the higher the annual depreciation or amortization expense that must be deducted from earnings. The expenses that have flowed into the income statement due to the balance sheet write - up are calculated as follows:

By the end of 1986, through the additional deduction of $11.6 million in expenses from the profits of the "new" Scott Fetzer, the difference between the net asset values of the "new" and "old" economic entities had been reduced from $142.6 million to $131 million. Over time, the deduction of the same expenses from profits will cause most of the premium to disappear, and the two balance sheets will converge. However, unless the land is sold or the inventory level is further reduced, the higher depreciation and amortization expenses will continue to affect the income statement of the "new" company.

If we think through these questions, we can gain some insights about what may be called "owner earnings." These represent (a) reported earnings plus (b) depreciation and certain other non - cash charges less (c) the average annual amount of capitalized expenditures for plant and equipment, etc. that the business requires to fully maintain its long - term competitive position and its unit volume. By calculating owner earnings, we can make an estimate of a company's intrinsic value and thus determine if a company is cheap or not.

In 1986, we faced a challenging market environment with few attractive investment opportunities in the equity market. We focused on managing our existing businesses well, working with outstanding managers, and being cautious in our capital allocation decisions. We also emphasized the importance of understanding the true economic earnings of a company, rather than just relying on GAAP accounting numbers. As always, we remained committed to our long - term investment strategy and to working with people we like and trust.

Warren E. Buffett
Chairman of the Board
February 27, 1987