Berkshire Hathaway will release its Annual Report tomorrow after the close of trading. In my Opinion it is recommended reading for anyone that invests. The First 20-25 pages of the Annual Report are the Chairmans letter to Berkshire Hathaway shareholders. This is where you get a view into the mind of Warren Buffett, his views, opinions and take on the market. Here is a small excerpt which warned about the housing mess that unfolded a last year.

“The slowdown in residential real estate activity stems in part from the weakened lending practices
of recent years. The “optional” contracts and “teaser” rates that have been popular have allowed borrowers
to make payments in the early years of their mortgages that fall far short of covering normal interest costs.
Naturally, there are few defaults when virtually nothing is required of a borrower. As a cynic has said, “A
rolling loan gathers no loss.” But payments not made add to principal, and borrowers who can’t afford
normal monthly payments early on are hit later with above-normal monthly obligations. This is the Scarlett
O’Hara scenario: “I’ll think about that tomorrow.” For many home owners, “tomorrow” has now arrived.
Consequently there is a huge overhang of offerings in several of HomeServices’ markets.”

- Warren Buffett in the 2006 Charimans Letter to Berkshire Shareholders.

Berkshire is one of the most diverse companies in the US. It has operations in Insurance, Manufacturing, Housing, Retail, Utilities and more. Reading the financial details of each segment along with Buffets commentary usually provides valuable insight into the industries and the economy.

What should shareholders look for?
If you’re a shareholder of Berkshire Hathaway there is a lot to look for in the Annual Report. Here’s a small list

  • Berkshire Hathaway Assurance Corp and Insuring Muni Bonds.
  • The Marmon purchase.
  • TXU Bonds.
  • What Buffett likes about Kraft (KFT)?
  • More details on last years teaser Burlington Northern (BNI).
  • How the Insurance sector is performing?
  • How last years 2 big acquisitions TTI and Equitas are performing?
  • Is Buffett still invested in the Brazilian Real?
  • and finally the most important thing to look for, how is the search going for investment managers to replace Warren Buffett?

I will be dissecting the Annual report in posts this weekend.