Part 5 of our exhilarating series on the words of Warren Buffett.

Today we look at Buffett's take on Berkshire Hathaway's 1981 results...

In his 1981 letter, Buffett discusses his preference for buying stocks of certain companies at reasonable prices versus the potential to buy whole companies at inflated prices:

"Regardless of the impact upon immediately reportable earnings, we would rather buy 10% of Wonderful Business T at X per share than 100% of T at 2X per share. Most corporate managers prefer just the reverse, and have no shortage of stated rationales for their behavior."

To prove his point, Buffett sizes up Berkshire's own record of business acquisitions:

"Our preaching was better than our performance. (We neglected the Noah principle: predicting rain doesn't count, building arks does.)"

Buffett continues his self-flagellation, humorously enough:

"For example, last year your Chairman volunteered his expert opinion on the rosy future of the aluminum business. Several minor adjustments to that opinion - now aggregating approximately 180 degrees - have since been required."

The end result of all this self-deprecation, however, is Buffett mentioning that Berkshire's been a pretty good stock picker:

"In just four ownership positions in this category - GEICO Corporation, General Foods Corporation, R. J. Reynolds Industries, Inc. and The Washington Post Company - our share of undistributed and therefore unrecorded earnings probably will total well over $35 million in 1982."

GEICO again:

"Over half of the large gain in Berkshire�s net worth during 1981 - it totaled $124 million, or about 31% - resulted from the market performance of a single investment, GEICO Corporation.

On inflation (and other things):

"...our views regarding long-term inflationary trends are as negative as ever. Like virginity, a stable price level seems capable of maintenance, but not of restoration."

Buffett predicts a downturn in the insurance business, due to competive pressures, and:

"In recent years hurricanes have stayed at sea and motorists have reduced their driving. They won't always be so obliging."

So, as the first year of the Ronald Reagan presidency ended, Warren Buffett wasn't particularly optimistic. Which, for once, made him similar to every other American.