My favorite five from Warren Buffett’s annual letter 2016

My Five Picks.

(1) “Berkshire’s gain in net worth during 2016 was $27.5 billion, which increased the per-share book value by 10.7%.”

(2) “When Ajit entered Berkshire’s office on a Saturday in 1986, he did not have a day’s experience in the insurance business…Ajit has created tens of billions of value for Berkshire shareholders.”

(3) “At bottom, a sound insurance operation needs to adhere to four disciplines. It must (a) understand all exposures that might cause a policy to incur losses; (b) conservatively assess the likelihood of any exposure actually causing a loss and the probable cost if it does; (c) set a premium that, on average, will deliver a profit after both prospective loss costs and operating expenses are covered; and (d) be willing to walk away if the appropriate premium can’t be obtained.”

(4) “The other guy is doing it, so we must as well,” spells trouble in any business, but in none more so than insurance.”

(5) “When insurance prices increase, people shop more. And when they shop, GEICO wins.”

(Bonus) There’s a good chance your friends will be talking about Shoe Dog by Nike’s Phil Knight, because Buffett really enjoyed this book. Really.