Warren Buffett shareholder letter: What does 50th anniversary missive say?

Investor Warren Buffett says his company delivered another strong year, with $19.9 billion in profits, and he believes Berkshire Hathaway will continue thriving thanks to its collection of "remarkable businesses" and investments.

Buffett's annual letter to shareholders was posted online Saturday. This year he reflected on 50 years of leading Berkshire and its future.

Buffett reiterated that Berkshire's huge size will keep it from achieving gains nearly as strong as in the past. And he defended Berkshire's decentralized structure as the ideal way to combat bureaucracy and maximize gains.

The 84-year-old investor didn't name his eventual successor, but he did discuss qualities that person will need.

Buffett always includes a few good one-liners in his letter. Here's a sampling:
 

"Berkshire now owns 9 1/2 companies that would be listed on the Fortune 500 were they independent (Heinz is the 1/2). That leaves 490 1/2 fish in the sea. Our lines are out." 

"If horses had controlled investment decisions, there would have been no auto industry."

Here's how the Warren Buffett shareholder letter begins:

It was a good year for Berkshire on all major fronts, except one. Here are the important developments:

• Our “Powerhouse Five” – a collection of Berkshire’s largest non-insurance businesses – had a record $12.4 billion of pre-tax earnings in 2014, up $1.6 billion from 2013.* The companies in this sainted group are Berkshire Hathaway Energy (formerly MidAmerican Energy), BNSF, IMC (I’ve called it Iscar in the past), Lubrizol and Marmon.

Of the five, only Berkshire Hathaway Energy, then earning $393 million, was owned by us a decade ago. Subsequently we purchased another three of the five on an all-cash basis. In acquiring the fifth, BNSF, we paid about 70% of the cost in cash and, for the remainder, issued Berkshire shares that increased the number outstanding by 6.1%. In other words, the $12 billion gain in annual earnings delivered Berkshire by the five companies over the ten-year span has been accompanied by only minor dilution. That satisfies our goal of not simply increasing earnings, but making sure we also increase per-share results.

If the U.S. economy continues to improve in 2015, we expect earnings of our Powerhouse Five to improve as well. The gain could reach $1 billion, in part because of bolt-on acquisitions by the group that have already closed or are under contract.

•  Our bad news from 2014 comes from our group of five as well and is unrelated to earnings. During the year, BNSF disappointed many of its customers. These shippers depend on us, and service failures can badly hurt their businesses.

BNSF is, by far, Berkshire’s most important non-insurance subsidiary and, to improve its performance, we will spend $6 billion on plant and equipment in 2015. That sum is nearly 50% more than any other railroad has spent in a single year and is a truly extraordinary amount, whether compared to revenues, earnings or depreciation charges.

Though weather, which was particularly severe last year, will always cause railroads a variety of operating problems, our responsibility is to do whatever it takes to restore our service to industry-leading levels. That can’t be done overnight: The extensive work required to increase system capacity sometimes disrupts operations while it is underway. Recently, however, our outsized expenditures are beginning to show results. During the last three months, BNSF’s performance metrics have materially improved from last year’s figures. 

The letter is one of the best-read reports in the business world because of Buffett's track record and his knack for explaining complicated issues.