This week, drop everything and head over to the website of Berkshire Hathaway and read the annual letter to shareholders by Warren Buffett (link at end of this article).

Highlights and concepts to learn from the oracle:

1. Intrinsic Value: This is the value of a business above and beyond what is visible on earnings statements, cash flow statements and balance sheets. It goes into intangibles like brand name, management experience, existing market position and so on. 
   
2. How growth rate presentations can be skewed: For example, picking a particularly poor year of operation as a starting point, and comparing with your recent best year can give a very skewed growth rate representation for a business. Note that this applies to mutual fund performance charts as well. 
   
3. Satisfactory gains: There are certain gains which you can achieve in an almost riskless fashion - with Treasury Notes, short term bonds and with CDs - probably 4-5% on a 1-2 year CD or bond. So if you are going to take more risk than that, you must be suitably compensated - higher the risk, more the compensation you should demand. So all investments are not the same - you must gain satisfactory returns in the context of that investment.
   
4. Purchasing companies with stock or with cash - when one of the companies you owns issues new shares to purchase another firm, your shareholder value is being diluted (as the new shares came out of "nowhere" - that is, in reality, as a dilution of the value of your shares). Of course, the hope is that the company being acquired delivers equivalent or greater value - but this does not always work out.
   
   An all cash acquisition is more direct and traceable. 
   
5. Emphasis on underwriting discipline for insurance firms - a lesson on being a better insurance company, and a wider lesson to "not do anything it takes to get new business". Read our One Insurance Guide for more on underwriting.
   
6. An excellent write up on what "float" is? This will give you the single biggest reason many insurance companies are in that business!
   
7. The importance of "widening the moat" - increasing your competitive advantages in business. An all important consideration in starting your own business or in investing in other businesses.

You can find this letter here.