# Berkshire Hathaway Letters to Shareholders, 2016  ## Metadata - Author: [[Warren Buffett]] - Full Title: Berkshire Hathaway Letters to Shareholders, 2016 - Category: #books ## Highlights - It is these considerations which caused the Company at year end to include in its working capital $5.4 million of marketable securities, composed of short-term municipal bonds, commercial paper and common stock. Because of the uncertainties in knowing when the Company may be called upon to produce substantial sums of cash, and the possibility that this might not occur for a considerable period of time, your directors have felt that we should be as zealous to achieve a realistic return on this portion of our capital as we are on the other funds that are at the time invested in plant, inventories, receivables, etc. Accordingly, it is the present intention of the directors to proceed toward the interim investment of a major portion of these funds in marketable common stocks. This should hold promise not only of greater income than can be achieved through alternative investment possibilities in the field of non-equity marketable securities, but also provides us with the opportunity to participate in earnings derived outside of our textile business, even if only temporarily and indirectly. ([Location 412](https://readwise.io/to_kindle?action=open&asin=B00DUM1W3E&location=412)) - Note: Added stocks in non-textile companies to holdings, which smoothed out business cycle for their textile company when compared with competitors. Allows for investment even during downturns in business cycle, which can allow them to outcompete competitors. This does seem risky though - holding it in short term treasuries would likely be way safer if the money might be needed at short notice for significant investments. Since it's Warren B though, it probably worked out (Fooled by Randomness) - All earnings of the insurance subsidiaries are being retained to build additional capital strength. Our investment in the insurance companies reflects a first major step in our efforts to achieve a more diversified base of earning power. The success of this effort is indicated by the attainment of earnings in the subsidiaries during 1967 which substantially exceeded the earnings attributable to a larger capital investment in the textile business. We expect that there will be years in the future when the order of relative profitability is reversed, reflecting different stages in both the insurance and textile cycles. However, we believe it is an added factor of strength to have these two unrelated sources of earnings rather than to be solely exposed to the conditions of one industry, as heretofore. ([Location 462](https://readwise.io/to_kindle?action=open&asin=B00DUM1W3E&location=462)) - Note: Diverisfying again to become less fragile as a business. The stable cashflows from insurance also allow them to build up capital reserves and allocate larger amounts of capital to growth opportunities