However, Buffett’s preferred measure of Berkshire’s performance has traditionally been growth in book value — its assets minus liabilities — though he says the company’s intrinsic value is much higher.
Berkshire’s book value gained a substantial 18.2 percent last year, but could not match the S&P 500’s 32.4 percent run-up.
That marks the fourth year out of the past five years that the company has underperformed the S&P.
Since Buffett took over the Berkshire textile mill in 1965, the company has only fallen short of the S&P 500 in 10 of those years.
However, in his letter, Buffett noted that over the latest full six-year market cycle — which would include S&P’s rock-bottom market year of 2008 when it lost 37 percent — the company outperformed the benchmark index.
“Through full cycles in future years, we expect to do that again,” Buffett wrote.
“If we fail to do so, we will not have earned our pay. After all, you could always own an index fund and be assured of S&P results,” he said.