Lower tax rate fuels record profit for Buffett's Berkshire
00:15, Feb 25, 2018
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Warren Buffett wrote that his multinational conglomerate could report $65.3 billion in gains of its net worth for the year.
Thanks to legislation, signed by United States president Donald Trump in late December, Berkshire Hathaway was able to add an extra $29 billion to its net worth gains.
The company also saw its war chest swell: it had $116 billion in cash and US Treasury bills as of the end of 2017, a financial manna that Buffett wants to use to make significant new acquisitions.
So Berkshire held almost $116 billion in cash and short-term bonds at year end.
During the bet from 2008 through 2017, the S&P 500 index fund Buffett picked gained 125.8%, versus 87.7% for the top-performing fund of funds that was part of the bet. Equity holdings include Apple, Wells Fargo and Coca-Cola.
Last month, Buffett gave greater oversight of Berkshire's non-insurance businesses such as the BNSF railroad, Precision Castparts and Dairy Queen ice cream to the energy executive Gregory Abel, while the insurance specialist Ajit Jain added supervision of insurance operations such as the Geico auto insurer. That compares with $6.3 billion, or $2.55 per B share, a year ago.
Morgan Stanley estimates that Berkshire could see an earnings boost of as much as $35 billion in last year's final quarter.
The lower tax rate also contributed to a 23 percent full-year boost in Berkshire's book value, which measures assets minus liabilities and Buffett considers a good indicator of Berkshire's net worth, to $211,750 per Class A share.
It's important to remember that even Buffett's Berkshire Hathaway (BRK-A, BRK-B) hasn't been immune to significant swings in its stock price either.
Despite our recent drought of acquisitions, Charlie and I believe that from time to time Berkshire will have opportunities to make very large purchases. Overall - and over time - we should get decent results.
Buffett says a 10-year bet he made with a group of hedge funds shows why investors should be wary of fees and focus on investing regularly for the long term. That ended a year ago, and Buffett - who bet slow, steady gains by the S^and^P 500 would beat out hedge funds over the decade - won with flying colors.
"In America, equity investors have the wind at their back", he said.
It's brutal - for the hedge funds.
Buffett says investors shouldn't assume that bonds are less risky than stocks.
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