Warren Buffet's annual letter to share holders is out today and well worth the time spent reading it. (http://www.berkshirehathaway.com/letters/2010ltr.pdf).
Well the number one weird thing is the share price. $100000 plus. And part of the reason for that is the way Warren Buffet measures Berkshire Hathaway's (ie his) performance.
You won't find net income given much shrift as a useful figure - in fact it's booted into the long grass. But Warren's favourite metric - growth in annual per share book value - now has a competitor. The rolling five year return.
From 1965-2010 there are 42 five-year periods. Berkshire Hathaway beat the S&P in every period. This is a stellar performance. Not only that: the S&P had six negative periods in that time (nominally at least, the after-inflation picture would be less rosy). Berkshire had none. It was safer and more profitable than the index.
How did they do it?
Here's one quote from the letter:
'At Berkshire, managers can focus on running their businesses: They are not subjected to meetings at headquarters nor financing worries nor Wall Street harassment. They simply get a letter from me every two years and call me when they wish.'
They don't teach that at Harvard.
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