![]() Beyond insurance, Berkshire owns a set of sizable businesses that Buffett bought, one by one, and that he calls his Sainted Seven. At Berkshire's heart is a large property-and-casualty insurance operation composed of several unfamous companies (such as National Indemnity), which generates ''float'' that Buffett invests. Berkshire had more than $2 billion in revenues in 1987, will probably rank around 30th in FORTUNE's annual list of the largest diversified services companies, and is powerfully strange in its makeup. Buffett, a witty, straightforward man of 57, owns 42% of the company his wife, Susan, 55, another 3%. It rose to a high of $4,200 in 1987 and was recently about $3,100. The vehicle through which all this got done, Berkshire, had a stock price of around $12 in 1965 when Buffett took control. The operating earnings were more than the net income of Dow Jones, or Pillsbury, or Corning Glass Works. In 1987 the Berkshire offense was nicely balanced: The investor produced $249 million (after allowances for taxes) in realized and unrealized gains the businessman generated $215 million in after-tax operating earnings from Berkshire's stable of businesses, for that total of $464 million. In effect, this guy grinds out the yardage, while Buffett the investor throws bombs. But the other craftsman at work in Berkshire is Buffett the businessman, a buyer and manager of companies and a fellow whose skill is not understood widely at all. All three, though they fell substantially in the crash, were standouts for the entire year: Geico, the auto insurance company, was up by 12% Washington Post by 20% Capital Cities/ ABC by 29%. Having said for more than two years that he could not find reasonably priced stocks to buy for Berkshire, Buffett came into October 19 wearing heavy armor, owning almost no common equities besides those of three companies that he thinks of as ''permanent'' parts of Berkshire's portfolio. That Buffett was certainly abroad in the land in 1987. The Wizard of Omaha the stock-picking genius who turned $9,800, most of it saved from paper routes, into a personal net worth that is today more than $1.6 billion the man whose superlative, long-running investment performance has become ever more difficult for the efficient-market camp to explain away as luck. Most of the business world knows about Warren Buffett the investor. Behind that record - behind Buffett, in fact - is a double-barreled story, which in all the words that have been written about him has usually been told as single-bore only. But both that holding and the Salomon preferred (which Buffett figures to have been worth about $685 million at year-end) are carried at cost on Berkshire's books and were nonevents as far as the company's 1987 record is concerned. At year-end Berkshire had an unrealized profit in the Texaco securities. ![]() Second, Buffett reveals that Berkshire began buying short-term Texaco bonds last year after the company went into bankruptcy, at a point when many other investors were bailing out of the bonds. That should put an end to the persistent rumors about divisions between the two men (see box). ![]() redeemable convertible preferred stock for Berkshire just before the October crash, makes it clear in his chairman's letter that he is solidly behind the investment bank's chairman, John Gutfreund. First, Buffett, who bought $700 million of Salomon Inc. The annual report, which readers always comb for Buffett's once-a-year revelations about what he has been doing in the securities markets, will carry two special pieces of news. But in a year in which many professional investors had their heads handed to them, this latest example of Buffett brushwork has to rank as one more masterpiece. That is somewhat below the 23.1% annual average that Buffett has recorded since taking over the company 23 years ago. Berkshire - whose shareholders, I wish to say quickly and happily, have long included me - chalked up a $464 million gain in net worth, an advance of no less than 19.5%. A preview: As a work of art, the year was not a minor Buffett. (FORTUNE Magazine) – WARREN BUFFETT, chairman of Berkshire Hathaway, calls the conglomerate his ''canvas,'' and shortly, when its annual report comes out, the world will learn precisely what kind of picture this legendary investor painted in the tumultuous year of 1987.
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