Warren Buffett’s conglomerate Berkshire Hathaway Inc. reported a 15 percent increase in its fourth-quarter profit on Saturday, and Buffett issued his annual letter to shareholders calling for higher profits in the next year absent a recession.
Akin Oyedele of Business Insider had the news:
During the fourth quarter, net income rose to $6.29 billion, or $3,823 a share, from $5.48 billion, or $3,333, in the prior year. Operating earnings, excluding some investment outcomes, were $2,665 a share. Analysts had estimated an average of $2,717, according to Bloomberg.
Berkshire’s profits rose as Buffett’s many investments in subsidiaries including the insurer Geico continued to pay off. The company owns stakes in publicly traded companies, and also many businesses outright.
Speaking of his wholly owned businesses in Berkshire’s manufacturing, service and retailing group, Buffett wrote that “absent a recession, earnings from the group will likely grow in 2017, in part because Duracell and Precision Castparts (both bought in 2016) will for the first time contribute a full year’s earnings to this group.”
The most recent 13-F filing from Berkshire showed that the company continued to buy airline stocks even after calling the sector a “death trap for investors” during his 2013 annual shareholder meeting. The firm more than doubled its holding in Apple.
Nicole Friedman of The Wall Street Journal reports that Buffett has plenty of cash for more acquisitions:
Book value, a measure of assets minus liabilities that is Mr. Buffett’s preferred yardstick for measuring net worth, rose 10.7% to $172,108 a Class A share in 2016, compared with a 12% total return in the S&P 500, including dividends.
Mr. Buffett, in his letter, said that over the past 52 years — “since present management took over” — Berkshire’s per-share book value has grown from $19 to $172,108, a rate of 19% compounded annually.
For the full year, Berkshire’s net earnings dipped to $24.07 billion from $24.08 billion.
In addition, the 86-year-old Mr. Buffett, whose shrewd investments have earned him the nickname “the Oracle of Omaha,” still has plenty of cash on hand for future acquisitions as a way to drive profit. In his annual letter, Mr. Buffett said Berkshire has $86 billion in “cash and equivalents,” which includes U.S. Treasury Bills.
Josh Funk of The Toronto Globe and Mail reported that Buffett avoided politics in his letter:
Buffett reiterated his long-term outlook for a prosperous America, but he mostly steered clear of politics this year.
“I’ll repeat what I’ve both said in the past and expect to say in future years: Babies born in America today are the luckiest crop in history,” wrote Buffett, who has said he thinks the economy will be OK under President Donald Trump. Buffett is a longtime Democrat who supported Hillary Clinton in last year’s campaign.
Without mentioning Trump’s immigration policies, Buffett did note that “a tide of talented and ambitious immigrants” played a significant role in the country’s prosperity.
Buffett used the letter to again explain the advantages of low-cost index funds. He said he estimates that wealthy investors who use high-priced advisers have wasted more than $100 billion over the past decade.
“The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients,” Buffett wrote. “Both large and small investors should stick with low-cost index funds.”
