What four decades of correspondence from the Oracle of Omaha reveal

WHEN FUTURE generations want to study today’s capitalists, a good place to start would be Warren Buffett’s annual letters to the shareholders of his firm, Berkshire Hathaway. Unfortunately, any economic insights from the world’s most celebrated investor are woven in with lots of corny jokes about golf and fast food. Mindful that readers may not have the intestinal fortitude to stomach the Oracle of Omaha’s unique sense of humour, The Economist has performed a textual analysis of 40 years’ worth of Mr Buffett’s letters to see what his language reveals about his thinking.

Berkshire has changed a lot. Having grown considerably in size, Mr Buffett now speaks of “businesses”, rather than “business”. He has also taken to using the adjective “huge” (see chart). The letters track how the firm used to focus on buying small stakes in listed companies; it now buys large, established firms outright.

This shifting strategy has made it tough for outsiders to value Berkshire properly. On the face of it last year was a pretty dismal one for the company. Berkshire’s book value per share rose by just 0.4%, its worst showing since the financial crisis. Earnings were just $4bn, a meagre 1.2% return on equity.

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