BUFFETT PARTNERSHIP, LTD.
810 KIEWIT PLAZA
OMAHA 31, NEBRASKA
July 8, 1964
First Half Performance
The whole family is leaving for California on June 23rd so I am fudging a bit on this report and writing it June 18th. However, for those of you who set your watches by the receipt of our letters. I will maintain our usual chronological symmetry in reporting, leaving a few blanks which Bill will fill in after the final June 30th figures are available.
During the first half of 1964 the Dow-Jones Industrial Average (hereinafter called the “DOW”) advanced from 762.95 to 831.50. If one had owned the Dow during this period, dividends of approximately 14.40 would have been received, bringing the overall return from the Dow during the first half to plus 10.0%. As I write this on June 18th, it appears that our results will differ only insignificantly from those of the Dow. I would feel much better reporting to you that the Dow had broken even, and we had been plus 5%, or better still, that the Dow had been minus 10%, and we had broken even. I have always pointed out, however, that gaining an edge on the Dow is more difficult for us in advancing markets than in static or declining ones.
To bring the record up to date, the following summarizes the performance of the Dow, the performance of the Partnership before allocation to the general partner and the limited partners' results:
| Year | Overall Results From Dow (1) | Partnership Results (2) | Limited Partners' Results (3) |
| 1957 | -8.4% | 10.4% | 9.3% |
| 1958 | 38.5% | 40.9% | 32.2% |
| 1959 | 20.0% | 25.9% | 20.9% |
| 1960 | -6.2% | 22.8% | 18.6% |
| 1961 | 22.4% | 45.9% | 35.9% |
| 1962 | -7.6% | 13.9% | 11.9% |
| 1963 | 20.6% | 38.7% | 30.5% |
| $1^{st}$ half 1964 | 10.9% | 12.0% | 10.5% |
| Cumulative results | 116.1% | 521.0% | 354.4% |
| Annual compounded rate | 10.8% | 27.6% | 22.2% |
(See next page for footnotes to table.)
Footnotes to preceding table:
(1) Based on yearly changes in the value of the Dow plus dividends that would have been received through ownership of the Dow during that year. The table includes all complete years of partnership activity.
(2) For 1957-61 consists of combined results of all predecessor limited partnerships operating throughout the entire year after all expenses but before distributions to partners or allocations to the general partner.
(3) For 1957-61 computed on the basis of the preceding column of partnership results allowing for
allocation to the general partner based up on the present partnership agreement, but before monthly withdrawals by limited partners.
Buying activities during the first half were quite satisfactory. This is of particular satisfaction to me since I consider the buying end to be about 90% of this business. Our General category now includes three companies where B.P.L. is the largest single stockholder. These stocks have been bought and are continuing to be bought at prices considerably below their value to a private owner. We have been buying one of these situations for approximately eighteen months and both of the others for about a year. It would not surprise me if we continue to do nothing but patiently buy these securities week after week for at least another year, and perhaps even two years or more.
What we really like to see in situations like the three mentioned above is a condition where the company is making substantial progress in terms of improving earnings, increasing asset values, etc., but where the market price of the stock is doing very little while we continue to acquire it. This doesn't do much for our short-term performance, particularly relative to a rising market, but it is a comfortable and logical producer of longer-term profits. Such activity should usually result in either appreciation of market prices from external factors or the acquisition by us of a controlling position in a business at a bargain price. Either alternative suits me.
It is important to realize, however, that most of our holdings in the General category continue to be securities which we believe to be considerably undervalued, but where there is not the slightest possibility that we could have a controlling position. We expect the market to justify our analyses of such situations in a reasonable period of time, but we do not have the two strings to our bow mentioned in the above paragraph working for us in these securities.
Investment Companies
We regularly compare our results with the two largest open-end investment companies (mutual funds) that follow a policy of being typically 95%-100% invested in common stocks, and the two largest diversified closedend investment companies. These four companies, Massachusetts Investors Trust, Investors Stock Fund, Tri-Continental Corp., and Lehman Corp., manage over \$4 billion and are probably typical of most of the \$28 billion investment company industry. Their results are shown below. My opinion is that this performance roughly parallels that of the overwhelming majority of other investment advisory organizations which handle, in aggregate, vastly greater sums.
| Year | Mass. Inv. Trust (1) | Investors Stock (1) | Lehman (2) | Tri-Cont. (2) | Dow | Limited Partners |
| 1957 | -11.4% | -12.4% | -11.4% | -2.4% | -8.4% | 9.3% |
| 1958 | 42.7% | 47.5% | 40.8% | 33.2% | 38.5% | 32.2% |
| 1959 | 9.0% | 10.3% | 8.1% | 8.4% | 20.0% | 20.9% |
| 1960 | -1.0% | -0.6% | 2.5% | 2.8% | -6.2% | 18.6% |
| 1961 | 25.6% | 24.9% | 23.6% | 22.5% | 22.4% | 35.9% |
| 1962 | -9.8% | -13.4% | -14.4% | -10.0% | -7.6% | 11.9% |
| 1963 | 20.0% | 16.5% | 23.7% | 18.3% | 20.6% | 30.5% |
| $1^{st}$ half 1964 | 11.0% | 9.5% | 9.6% | 8.6% | 10.9% | 10.5% |
| Cumulative Results | 105.8% | 95.5% | 98.2% | 105.1% | 116.1% | 354.4% |
| Annual Compounded Rate | 10.1% | 9.4% | 9.6% | 10.1% | 10.8% | 22.2% |
(1) Computed from changes in asset value plus any distributions to holders of record during year.
(2) From 1964 Moody's Bank & Finance Manual for 1957-63. Estimated for first half 1964.
These figures continue to show that the most highly paid and respected investment management has difficulty matching the performance of an unmanaged index of blue chip stocks. The results of these companies in some ways resemble the activity of a duck sitting on a pond. When the water (the market) rises, the duck rises; when it falls, back goes the duck. SPCA or no SPCA, I think the duck can only take the credit (or blame) for his own activities. The rise and fall of the lake is hardly something for him to quack about. The water level has been of great importance to B.P.L’s performance as the table on page one indicates. However, we have also occasionally flapped our wings.
I would like to emphasize that I am not saying that the Dow is the only way of measuring investment performance in common stocks. However, I do say that all investment managements (including selfmanagement) should be subjected to objective tests, and that the standards should be selected a priori rather than conveniently chosen retrospectively.
The management of money is big business. Investment managers place great stress on evaluating company managements in the auto industry, steel industry, chemical industry, etc. These evaluations take enormous amounts of work, are usually delivered with great solemnity, and are devoted to finding out which companies are well managed and which companies have management weaknesses. After devoting strenuous efforts to objectively measuring the managements of portfolio companies, it seems strange indeed that similar examination is not applied to the portfolio managers themselves. We feel it is essential that investors and investment managements establish standards of performance and, regularly and objectively, study their own results just as carefully as they study their investments.
We will regularly follow this policy wherever it may lead. It is perhaps too obvious to say that our policy of measuring performance in no way guarantees good results--it merely guarantees objective evaluation. I want to stress the points mentioned in the "Ground Rules" regarding application of the standard--namely that it should be applied on at least a three-year basis because of the nature of our operation and also that during a speculative boom we may lag the field. However, one thing I can promise you. We started out with a 36-inch yardstick and we'll keep it that way. If we don't measure up, we won't change yardsticks. In my opinion, the entire field of investment management, involving hundreds of billions of dollars, would be more satisfactorily conducted if everyone had a good yardstick for measurement of ability and sensibly applied it. This is regularly done by most people in the conduct of their own business when evaluating markets, people, machines, methods, etc., and money management is the largest business in the world.
Taxes
We entered 1964 with net unrealized gains of \$2,991,090 which is all attributable to partners belonging during 1963. Through June 30th we have realized capital gains of \$2,826,248.76 (of which 96% are long term) so it appears very likely that at least all the unrealized appreciation attributable to your interest and reported to you in our letter of January 25, 1964, (item 3) will be realized this year. I again want to emphasize that this has nothing to do with how we are doing. It is possible that I could have made the above statement, and the market value of your B.P.L. interest could have shrunk substantially since January 1st, so the fact that we have large realized gains is no cause for exultation. Similarly when our realized gains are very small there is not necessarily any reason to be discouraged. We do not play any games to either accelerate or defer taxes. We make investment decisions based on our evaluation of the most profitable combination of probabilities. If this means paying taxes I'm glad the rates on long-term capital gains are as low as they are.
As previously stated in our most recent tax letter of April 1, 1964 the safe course to follow on interim estimates is to pay the same estimated tax for 1964 as your actual tax was for 1963. There can be no penalties if you follow this procedure.
The tax liability for partners who entered January 1st will, of course, be quite moderate, as it always is in the first year for any partner. This occurs because realized capital gains are first attributed to old partners having an interest in unrealized appreciation. This, again, of course, has nothing to do with economic performance. All limited partners, new and old, (except for Bill Scott, Ruth Scott and Susan Buffett per paragraph five of the Partnership Agreement) end up with exactly the same results. As usual, net ordinary income for all partners is nominal to date.
As in past years, we will have a letter out about November 1st (to partners and those who have indicated an interest, to us by that time in becoming partners) with the amendment to the Partnership Agreement, Commitment Letter for 1965, estimate or the 1964 tax situation, etc. In the meantime, keep Bill busy this summer clearing up anything in this letter that comes out fuzzy.
Cordially,
Warren E. Buffett
BUFFETT PARTNERSHIP, LTD.
810 KIEWIT PLAZA
OMAHA 31, NEBRASKA
1964年7月8日
上半年业绩
全家将于6月23日出发去加州，所以这份报告我稍微耍了个滑头，在6月18日就动笔了。不过，对于那些按收到我们信件的时点来对表的朋友，我会尽量维持咱们惯常的时间对称性来写报告，留几个空，等6月30日的最终数据出来后，Bill再填进去。
1964年上半年，道琼斯工业平均指数（以下简称"道指"）从762.95点涨到831.50点。如果这期间持有道指，还能拿到大约14.40点的股息，那么道指上半年的总回报为+10.0%。我在6月18日写这封信时，看起来我们的业绩与道指相差无几。要是道指持平，我们跑赢5%，或者更好——道指跌10%，我们持平——那我汇报起来心情会好得多。不过我一直强调，在上涨市场里，我们要跑赢道指比在横盘或下跌市场里更难。
以下是截至目前的业绩总结，列明了道指的表现、合伙企业（在分配给普通合伙人之前的）业绩，以及有限合伙人的实际回报：
| 年份 | 道指整体回报 (1) | 合伙企业业绩 (2) | 有限合伙人回报 (3) |
| 1957 | -8.4% | 10.4% | 9.3% |
| 1958 | 38.5% | 40.9% | 32.2% |
| 1959 | 20.0% | 25.9% | 20.9% |
| 1960 | -6.2% | 22.8% | 18.6% |
| 1961 | 22.4% | 45.9% | 35.9% |
| 1962 | -7.6% | 13.9% | 11.9% |
| 1963 | 20.6% | 38.7% | 30.5% |
| $1^{st}$ 半年 1964 | 10.9% | 12.0% | 10.5% |
| 累计回报 | 116.1% | 521.0% | 354.4% |
| 年复合增长率 | 10.8% | 27.6% | 22.2% |
（上表脚注见下页）
上表脚注：
(1) 基于道指年度价值变化加上当年持有道指所能获得的股息。表中包含合伙企业完整运营的所有年度。
(2) 1957-1961年为所有前身有限合伙企业在扣除所有费用后、在向合伙人分配或向普通合伙人分配之前的全年综合业绩。
(3) 1957-1961年基于前一列合伙企业业绩计算，根据现行合伙协议考虑向普通合伙人的分配，但扣除有限合伙人的月度提款前。
上半年买入活动相当令人满意。我对此尤其满意，因为我认为买入端占了这门生意的约90%。我们的"低估类投资"类别现在包含三家公司，B.P.L.是其最大单一股东。这些股票一直在买入，并且将继续以远低于私人所有者价值的价格买入。其中一只标的我们已经买了大约18个月，另外两只也买了大约一年。如果我们接下来至少再花一年，甚至两年或更久，周复一周地耐心买入这些证券，我一点也不会意外。
像上面提到的那三只标的，我们最喜欢看到的情况是：公司本身在盈利改善、资产增值等方面取得实质性进展，但股价在我们持续买入期间几乎不动。这对我们的短期业绩没什么帮助——尤其是在上涨市场中——但从长期盈利角度看，这是一种舒服且合乎逻辑的产出方式。这种操作通常会导致两种结果：要么市场价格因外部因素而上涨，要么我们以便宜的价格获得一家企业的控股权。两个结果我都能接受。
不过，重要的是要认识到，我们"低估类投资"中的大部分仓位仍然是我们认为被大幅低估的证券，但我们绝无可能获得控股权。我们希望市场在合理时间内验证我们对这些情况的分析，但我们在这些证券上并没有上面提到的"两根弦"同时起作用。
投资公司
我们定期将我们的业绩与两家最大的开放式投资公司（共同基金）和两家最大的多元化封闭式投资公司进行比较。这两家开放式基金——Massachusetts Investors Trust 和 Investors Stock Fund——以及两家封闭式公司——Tri-Continental Corp. 和 Lehman Corp.——管理着超过40亿美元资产，可能代表了280亿美元投资公司行业中的典型水平。它们的业绩如下表所示。我的看法是，这些业绩大致上与绝大多数其他投资咨询机构（它们合计管理的资金规模大得多）的表现相当。
| 年份 | Mass. Inv. Trust (1) | Investors Stock (1) | Lehman (2) | Tri-Cont. (2) | 道指 | 有限合伙人 |
| 1957 | -11.4% | -12.4% | -11.4% | -2.4% | -8.4% | 9.3% |
| 1958 | 42.7% | 47.5% | 40.8% | 33.2% | 38.5% | 32.2% |
| 1959 | 9.0% | 10.3% | 8.1% | 8.4% | 20.0% | 20.9% |
| 1960 | -1.0% | -0.6% | 2.5% | 2.8% | -6.2% | 18.6% |
| 1961 | 25.6% | 24.9% | 23.6% | 22.5% | 22.4% | 35.9% |
| 1962 | -9.8% | -13.4% | -14.4% | -10.0% | -7.6% | 11.9% |
| 1963 | 20.0% | 16.5% | 23.7% | 18.3% | 20.6% | 30.5% |
| $1^{st}$ 半年 1964 | 11.0% | 9.5% | 9.6% | 8.6% | 10.9% | 10.5% |
| 累计回报 | 105.8% | 95.5% | 98.2% | 105.1% | 116.1% | 354.4% |
| 年复合增长率 | 10.1% | 9.4% | 9.6% | 10.1% | 10.8% | 22.2% |
(1) 根据资产价值变化加上当年向记录持有人分配的任何金额计算。
(2) 1957-63年数据来自1964年《穆迪银行与金融手册》。1964年上半年为估计值。
这些数据持续表明，报酬最高、最受尊敬的投资管理机构，其业绩也难敌一个未经管理的蓝筹股指数。这些公司的业绩在某种程度上就像池塘里的一只鸭子：水位（市场）上涨，鸭子就上升；水位下降，鸭子也跟着落下来。不管有没有动物保护协会，我认为鸭子只能为自己的活动邀功（或背锅）。湖水的涨落可不是它该嘎嘎叫的。正如第一页表格所示，水位高低对B.P.L.的业绩至关重要。不过，我们偶尔也会扑腾几下翅膀。
我想强调，我并不是说道指是衡量普通股投资业绩的唯一标准。但我的确认为，所有投资管理机构（包括自我管理）都应接受客观检验，而且衡量标准应当事先选定，而不是事后方便地选择。
资金管理是一门大生意。投资经理们非常重视对汽车、钢铁、化工等行业公司管理层的评估。这些评估耗费大量精力，通常以极其严肃的方式呈现，用于判断哪些公司管理得当、哪些存在管理弱点。在费尽力气客观评估投资组合公司管理层之后，奇怪的是，他们似乎很少对投资组合经理自身进行类似的考察。我们认为，投资者和投资管理机构必须建立业绩衡量标准，并定期、客观地审视自己的成果，就像他们认真审视自己的投资一样。
我们将始终贯彻这一方针，无论结果如何。说我们的业绩衡量政策并不能保证良好业绩——它仅仅保证客观评价——这或许过于明显了。我想强调"基本规则"中关于应用该标准的几点：首先，由于我们业务的性质，该标准至少应以三年为周期来应用；其次，在投机性繁荣时期，我们可能会落后。不过，有一件事我可以向你保证：我们一开始用的是36英寸的尺子，我们会一直用下去。如果我们达不到标准，我们不会换尺子。在我看来，整个投资管理领域——涉及数千亿美元——如果每个人都有一个衡量能力的好尺子并合理运用它，那么运作起来会更令人满意。大多数人在经营自己生意时，评估市场、人员、机器、方法等，都会这么做；而资金管理是全世界最大的生意。
税务
我们进入1964年时，未实现净收益为2,991,090美元，全部归属于1963年度内入伙的合伙人。截至6月30日，我们已实现资本利得2,826,248.76美元（其中96%为长期利得），因此看起来，至少你们在1964年1月25日信中报告的所有归属于你们权益的未实现增值（第3项），今年都将被实现。我再次强调，这与我们的表现无关。有可能我作上述陈述时，你们在B.P.L.的权益市值自1月1日以来已大幅缩水，因此我们有大量已实现利得并非值得欢欣鼓舞的理由。同样，当我们的已实现利得非常少时，也未必有任何理由感到沮丧。我们不会玩任何加速或推迟纳税的游戏。我们根据对最有利概率组合的评估来做投资决策。如果这意味着要缴税，我很庆幸长期资本利得税率如此之低。
正如我们在1964年4月1日的最新税务信中所说，关于中期预估税的安全做法是：为1964年缴纳与1963年实际税额相同的预估税。如果遵循此程序，不会有罚款。
对于1月1日入伙的合伙人，税负当然会相当适中，任何合伙人第一年都是如此。这是因为已实现资本利得首先归因于对未实现增值拥有权益的老合伙人。这再次与经济表现无关。所有有限合伙人——无论新旧（除合伙协议第五段规定的Bill Scott、Ruth Scott和Susan Buffett外）——最终结果完全相同。一如既往，所有合伙人的普通净收入至今微乎其微。
与往年一样，我们将在11月1日左右发出一封信（给合伙人以及届时已向我们表示意向成为合伙人的人），内容包括合伙协议修正案、1965年承诺函、1964年税务情况预估等。在此期间，让Bill这个夏天忙起来，把这封信里任何模糊不清的地方都理顺。
真诚的，
Warren E. Buffett