Chairman's Letter - 1977
Capital Cities possesses both extraordinary properties and
extraordinary management. And these management skills extend
equally to operations and employment of corporate capital. To
purchase, directly, properties such as Capital Cities owns would
cost in the area of twice our cost of purchase via the stock
market, and direct ownership would offer... See more
extraordinary management. And these management skills extend
equally to operations and employment of corporate capital. To
purchase, directly, properties such as Capital Cities owns would
cost in the area of twice our cost of purchase via the stock
market, and direct ownership would offer... See more
Chairman's Letter - 1977
if a business has good assets and good management, then it makes sense to park money with them rather than try to buy the asset
buying the asset would give control and responsibility to manage but if someone else can do it better than you, why bother?
reap rewards through proxy
Our experience has been that pro-rata portions of truly
outstanding businesses sometimes sell in the securities markets
at very large discounts from the prices they would command in
negotiated transactions involving entire companies.
outstanding businesses sometimes sell in the securities markets
at very large discounts from the prices they would command in
negotiated transactions involving entire companies.
Chairman's Letter - 1977
in public market companies, you can sometimes find parts or subsidiary businesses that trade much cheaper than they would in a negotiated trade
We select our marketable equity securities in much the same
way we would evaluate a business for acquisition in its entirety.
We want the business to be (1) one that we can understand, (2)
with favorable long-term prospects, (3) operated by honest and
competent people, and (4) available at a very attractive price.
We ordinarily make no attempt to... See more
way we would evaluate a business for acquisition in its entirety.
We want the business to be (1) one that we can understand, (2)
with favorable long-term prospects, (3) operated by honest and
competent people, and (4) available at a very attractive price.
We ordinarily make no attempt to... See more
Chairman's Letter - 1977
be around things you can understand, think in decades, be around good and honest people, don’t pay too much
Insurance companies offer standardized policies which can be
copied by anyone. Their only products are promises. It is not
difficult to be licensed, and rates are an open book. There are
no important advantages from trademarks, patents, location,
corporate longevity, raw material sources, etc., and very little
consumer differentiation to produce... See more
copied by anyone. Their only products are promises. It is not
difficult to be licensed, and rates are an open book. There are
no important advantages from trademarks, patents, location,
corporate longevity, raw material sources, etc., and very little
consumer differentiation to produce... See more
Chairman's Letter - 1977
in a commodity market, like insurance, where there are no real moats and the playbook is all available for anyone to copy…it all comes down to trust based on if the brand can maintain its promise.
the leadership has outsized impact on the performance
The pendulum now is beginning to swing the other way. We
estimate that costs involved in the insurance areas in which we
operate rise at close to 1% per month. This is due to continuous
monetary inflation affecting the cost of repairing humans and
property, as well as “social inflation”, a broadening definition
by society and juries of what is... See more
estimate that costs involved in the insurance areas in which we
operate rise at close to 1% per month. This is due to continuous
monetary inflation affecting the cost of repairing humans and
property, as well as “social inflation”, a broadening definition
by society and juries of what is... See more
Chairman's Letter - 1977
costs are rising when they had to pay premiums for repairs, and also the definition of what is included for insurance payout has increased
higher costs + more claims eligible
It is comforting to be in a
business where some mistakes can be made and yet a quite
satisfactory overall performance can be achieved. In a sense,
this is the opposite case from our textile business where even
very good management probably can average only modest results.
One of the lessons your management has learned - and,
unfortunately,... See more
business where some mistakes can be made and yet a quite
satisfactory overall performance can be achieved. In a sense,
this is the opposite case from our textile business where even
very good management probably can average only modest results.
One of the lessons your management has learned - and,
unfortunately,... See more
Chairman's Letter - 1977
being a subpar operator in a good market beats being an elite operate in a subpar market
With hard work and some imagination
Chairman's Letter - 1977
conviction even when feedback could lower it
This may say something about our forecasting abilities,
the nature of the textile industry, or both.
the nature of the textile industry, or both.