Interesting Tidbits From Buffet's Annual Shareholder Letter

Some interesting observations and excerpts from Berkshire's annual shareholder letter:

* Re-enforced that Berkshire will invest in businesses where profits can be reasonably predicted.

"In the past, it required no brilliance for people to foresee the fabulous growth that awaited such industries as autos (in 1910), aircraft (in 1930) and television sets (in 1950). But the future then also included competitive dynamics that would decimate almost all of the companies entering those industries. Even the survivors tended to come away bleeding.

Just because Charlie and I can clearly see dramatic growth ahead for an industry does not mean we can judge what its profit margins and returns on capital will be as a host of competitors battle for supremacy. At Berkshire we will stick with businesses whose profit picture for decades to come seems reasonably predictable. Even then, we will make plenty of mistakes.

 * Possible hinting of Berkshire successor?

"If Charlie, I and Ajit are ever in a sinking boat – and you can only save one of us – swim to Ajit."

  * Feels good about the record low housing starts as it's easing the supply of homes and believes that the housing problem will be behind us in a year or so.

"The industry is in shambles for two reasons, the first of which must be lived with if the U.S. economy is to recover. This reason concerns U.S. housing starts (including apartment units). In 2009, starts were 554,000, by far the lowest number in the 50 years for which we have data. Paradoxically, this is good news."

 * Defended issuance of Berkshire's stock for BNI (Burlington Northern Santa Fe Corp.) purchase.

"In the end, Charlie and I decided that the disadvantage of paying 30% of the price through stock was offset by the opportunity the acquisition gave us to deploy $22 billion of cash in a business we understood and liked for the long term."

 * Funny end to an insightful letter.

"P.S. Come by rail", asking shareholders to use BNI rail while coming to the annual shareholder meeting.