Derek from Stableboy Selections has posted two of the "missing" Berkshire Hathaway letters (1969 - 1977). The first is written by Ken Chace, the CEO that Buffett put in charge after he ousted Seabury Stanton. These go along with the previously released 1973 and 1976 letters, which I link to below.

Berkshire Hathaway 1969 & 1971 Shareholder Letters

1973 Shareholder Letter

1976 Shareholder Letter

In the 1976 letter, equity investments are listed, and GEICO accounts for 31% of total holdings. I don’t believe these include any equities purchased through Blue Chip Stamps. That’s a fairly large position for most modern-day funds. However, it doesn’t compare to the concentration of Buffett’s portfolio before he managed other people’s money: (in the 1950’s, courtesy of Robert Miles)

UPDATE: I reformatted both letters into PDF’s to make them a little more readable. For the PDF formats, follow these links: 1969; 1971

Yesterday the 13F’s were released for funds managing over $100 million. Below is a list of 3 picks that I found interesting:

1. Dr Pepper Snapple Group, Inc. (DPS)
Nelson Peltz (Trian), David Einhorn (Greenlight), Bill Ackman (Pershing)

In May, Dr Pepper was spun off of Cadbury Schweppes and traded in the $20-26 range until the end of the quarter. Shortly after the spin-off, I wrote this post citing Dr Pepper as a potential bargain. It looks like some large activist investors took my advice, loading up on DPS during the second quarter. (Peltz received shares from his Cadbury stake.) All together, the three managers own just over 13% of the entire company. In fact, I’m not sure why Pershing Square hasn’t been required to file a 13D/13G with over 5% of the company.

All three of these investors have been known to be activists. So, if they continue to acquire shares, one of them may attempt to influence management. One possibility for value creation is to sell or spin-off Dr Pepper’s bottling operations. This is a much lower margin, capital intensive business than selling syrup concentrate (their primary profit source). In 1986, Coca-Cola spun off its bottling operations as Coca-Cola Enterprises. Less than two years later, Warren Buffett acquired his stake.

2. American Express Company (AXP)
Ken Shubin Stein (Spencer), Glenn Greenberg (Chieftain)

Ken Shubin Stein made the case for American Express both at the Value Investing Congress and at Value Investors Club. The basic thesis is that American Express has a huge moat, and it’s price has be knocked down due to concerns about the economy and temporary issues with bad debt. It looks like these problems are either based on short-term sentiment, or are easily fixable by AMEX management. This is a typical Buffett-type investment, and has been named by some as a potential takeover target for Buffett himself (he already owns 13%).

3. Pfizer Inc. (PFE)
Bruce Berkowitz (Fairholme)

The Fairholme Fund’s acquisition of Pfizer shares is not surprising, and fits in with their recent theme of buying healthcare stocks. I could speculate the specific reasons for this purchase, but it’s probably best to hear it straight from Bruce Berkowitz:

$17 billion of free cash, which turns out to be over $2 per share of free cash for a triple-A quality company. This is the largest pharmaceutical company in the world trading under $20 per share.

[…] they are all worried about Lipitor and the new president. Lipitor doesn’t come off patent for another three years, and the company is dramatically changing. There is a new CEO with a wonderful strategy.

You will see Pfizer, in my opinion, do a lot more joint ventures. I think they will become almost like Exxon Mobil, which is really a merchant bank that has the distribution, size and cash to partner up with a lot of people around the world. Pfizer will do that. People just don’t realize the number of joint ventures they have and the power of their distribution channel.

Disclosure: As of its writing, we have no interest in any company mentioned in this post.

In Saturday’s Wall Street Journal, Elizabeth Wurtzel wrote an opinion piece titled “The Internet Is Ruining America’s Movies and Music.” She talks about how both businesses aren’t like they used to be, because of—you guessed it—the internet.

It’s easy to understand why many people in both the music and movie industries long for the good old days. They used to exist in government-sanctioned oligopolies where consumers had little choice in where their entertainment came from. Whether it was the three network TV stations, limited spectrum for radio, or your local theater being the only option for a movie. Here’s a passage from Wurtzel’s article:

In the era of the online music store — even if you buy from iTunes rather than stealing from LimeWire, the problem is the same — no one knows how to listen to a complete album anymore. Everything is slanted toward the hit single. This means that the music industry is oriented toward one-hit wonders rather than consummate musicians, and talent development is just not worth the trouble.

In reality, the opposite is true. One-hit wonders have always dominated sales in the music industry. This won’t change anytime soon—there will always be the megahits in the “head” of the long-tail. Places like iTunes or Netflix allow the obscure musicians and moviemakers to find some kind of an audience. Also, in the past, if I liked only one song from an artist, I may not purchase their album at all. Now, I can at least get the song I like.

In fact, 47% of our gross domestic product involves intellectual property (IP) transactions, and about 6% of our national worth — $626.6 billion annually — is from our copyright businesses. These are the segments of our economy that are suffering, or stand to do so, as a result of the Internet. The Internet, glorious as it is, should be thought of as the plague of postmodernity.

Because the internet (and computers in general) makes it easier to copy things, people like to blame it for destroying intellectual property rights. Yes, the internet has changed the dynamic for the media companies. But technology radically affecting an industry is nothing new. There are many reasons why the internet has changed media for the better.

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