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BUFFETTPARTNERSHIP.LTD.610KIEWITPLAZAOMAHA,NEBRASKA68131TELEPHONE042-4110January25,1967TheFirstDecadeThePartnershiphaditstenthanniversaryduring1966.Thecelebrationwasappropriate-anall-timerecord(bothpastandfuture)wasestablishedforourperformancemarginrelativetotheDow.Ouradvantagewas36pointswhichresultedfromaplus20.4%forthePartnershipandaminus15.6%fortheDow.Thispleasantbutnon-repeatableexperiencewaspartiallyduetoalacklusterperformancebytheDow.Virtuallyallinvestmentmanagersoutperformeditduringtheyear.TheDowisweightedbythedollarpriceofthethirtystocksinvolved.Severalofthehighestpricedcomponents,whichtherebycarrydisproportionateweight(Dupont,GeneralMotors),wereparticularlypoorperformersin1966.This,coupledwiththegeneralaversiontoconventionalbluechips,causedtheDowtosufferrelativetogeneralinvestmentexperience,particularlyduringthelastquarter.Thefollowingsummarizestheyear-by-yearperformanceoftheDow,theperformanceofthePartnershipbeforeallocation(onequarteroftheexcessover6%)tothegeneralpartner,andtheresultsforlimitedpartners:YearOverallResultsFromDow(1)PartnershipResults(2)LimitedPartners’Results(3)1957-8.4%10.4%9.3%195838.5%40.9%32.2%195920.0%25.9%20.9%1960-6.2%22.8%18.6%196122.4%45.9%35.9%1962-7.6%13.9%11.9%196320.6%38.7%30.5%196418.7%27.8%22.3%196514.2%47.2%36.9%1966-15.6%20.4%16.8%CumulativeResults141.1%1028.7%641.5%AnnualCompoundedRate9.7%29.0%23.5%(1)BasedonyearlychangesinthevalueoftheDowplusdividendsthatwouldhavebeenreceivedthroughownershipoftheDowduringthatyear.Thetableincludesallcompleteyearsofpartnershipactivity.(2)For1957-61consistsofcombinedresultsofallpredecessorlimitedpartnershipsoperatingthroughouttheentireyearafterallexpenses,butbeforedistributionstopartnersorallocationstothegeneralpartner.(3)For1957-61computedonthebasisoftheprecedingcolumnofpartnershipresultsallowingforallocationtothegeneralpartnerbaseduponthepresentpartnershipagreement.butbeforemonthlywithdrawalsbylimitedpartners.100Onacumulativeorcompoundedbasis,theresultsare:YearOverallResultsFromDowPartnershipResultsLimitedPartners’Results1957-8.4%10.4%9.3%1957–5826.9%55.6%44.5%1957–5952.3%95.9%74.7%1957–6042.9%140.6%107.2%1957–6174.9%251.0%181.6%1957–6261.6%299.8%215.1%1957–6395.1%454.5%311.2%1957–64131.3%608.7%402.9%1957–65164.1%943.2%588.5%1957–66122.9%1156.0%704.2%AnnualCompoundedRate11.4%29.8%23.9%InvestmentCompaniesOnthefollowingpageistheusualtabulationshowingtheresultsofthetwolargestopen-endinvestmentcompanies(mutualfunds)thatfollowapolicyofbeing,typically,95-100%investedincommonstocks,andthetwolargestdiversifiedclosed-endinvestmentcompanies.YearMass.Inv.Trust(1)InvestorsStock(1)Lehman(2)Tri-Cont(2)DowLimitedPartners1957-11.4%-12.4%-11.4%-2.4%-8.4%9.3%195842.7%47.5%40.8%33.2%38.5%32.2%19599.0%10.3%8.1%8.4%20.0%20.9%1960-1.0%-0.6%2.5%2.8%-6.2%18.6%196125.6%24.9%23.6%22.5%22.4%35.9%1962-9.8%-13.4%-14.4%-10.0%-7.6%11.9%196320.0%16.5%23.7%18.3%20.6%30.5%196415.9%14.3%13.6%12.6%18.7%22.3%196510.2%9.8%19.0%10.7%14.2%36.9%1966-7.7%-10.0%-2.6%-6.9%-15.6%16.8%CumulativeResults118.1%106.3%142.8%126.9%141.1%641.5%AnnualCompoundedRate8.6%7.9%9.8%9.0%9.7%23.5%(1)Computedfromchangesinassetvalueplusanydistributionstoholdersofrecordduringyear.(2)From1966Moody'sBank&FinanceManualfor1957-1965.Estimatedfor1966.Theseinvestmentcompanyperformancefigureshavebeenregularlyreportedheretoshowthatthenowisnopatsyasaninvestmentstandard.ItshouldagainbeemphasizedthatthecompanieswerenotselectedonthebasisofcomparabilitytoBuffettPartnership,Ltd.Thereareimportantdifferencesincluding:(1)investmentcompaniesoperateunderbothinternallyandexternallyimposedrestrictionsontheirinvestmentactionsthatarenotapplicabletous;(2)investmentcompaniesdiversifyfarmorethanwedoand,inallprobability,thereby101havelesschanceforareallybadperformancerelativetothenowinasingleyear;and(3)theirmanagershaveconsiderablylessincentiveforabnormalperformanceandgreaterincentiveforconventionality.However,therecordsabovedorevealwhatwell-regarded,highlypaid,full-timeprofessionalinvestmentmanagershavebeenabletoaccomplishwhileworkingwithcommonstocks.ThesemanagershavebeenfavoritesofAmericaninvestors(morethan600,000)makingfreechoicesamongmanyalternativesintheinvestmentmanagementfield.Itisprobablethattheirresultsaretypicaloftheoverwhelmingmajorityofprofessionalinvestmentmanagers.Itisnottrue,however,thatthesearethebestrecordsachievedintheinvestmentfield.AfewmutualfundsandsomeprivateinvestmentoperationshavecompiledrecordsvastlysuperiortotheDowand,insomecases,substantiallysuperiortoBuffettPartnership,Ltd.Theirinvestmenttechniquesareusuallyverydissimilartooursandnotwithinmycapabilities.However,theyaregenerallymanagedbyverybright,motivatedpeopleanditisonlyfairthatImentiontheexistenceofsuchsuperiorresultsinthisgeneraldiscussionoftherecordofprofessionalinvestmentmanagement.TrendsinOurBusinessAkeenmindworkingdiligentlyatinterpretingthefiguresonpageonecouldcometoalotofwrongconclusions.Theresultsofthefirsttenyearshaveabsolutelynochanceofbeingduplicatedorevenremotelyapproximatedduringthenextdecade.Theymaywellbeachievedbysomehungrytwen