© Reuters. BERKSHIRE HATHAWAY ON The LOOKOUT For A BIG ACQUISITION
by Trevor Hunnicutt and Jonathan Stempel
NEW YORK (Reuters) – Rpt putty §4-5 on Berkshire
Warren Buffett is in search of”one or more” big acquisitions to further improve the performance of his conglomerate Berkshire Hathaway, which has registered a record-high profit of nearly 45 billion dollars (36.6 billion euros) in 2017.
In his annual letter sent Saturday to the shareholders of Berkshire, the billionaire 87-year-old is said to have $ 116 billion of dollars available in cash and State bonds, low-yield, but struggle to find targets at prices that are “reasonable” because of the “buying frenzy” operated by large companies taking advantage of low rates.
Berkshire is usually paid to its acquisitions in cash.
“We will have a smile wider when we have redeployed the war chest of Berkshire in more productive assets,” wrote the CEO. “The goal of Berkshire is to increase strongly the results of the group, excluding insurance. For this, it is necessary to proceed with one or several huge acquisitions.”
The annual letter from the”oracle of Omaha”, significantly shorter than in other years (a little over 8,000 words against more than 14.000 a year ago), does not mention the entries to major Berskhire, such as those in Apple (NASDAQ:AAPL) or the bank Wells Fargo (NYSE:WFC) & Co, nor the recent slump in Wall Street. Similarly, the financial says nothing of his project to build a new offering in health with Amazon (NASDAQ:AMZN).com and JPMorgan Chase (NYSE:JPM) & Co.
“Is 87 years old, he doesn’t want to make enemies,” says Bill Smead, founder of Smead Capital Management in Seattle and a shareholder of Berkshire.
Berkshire reported an annual profit record of 44,94 billion, including a gain of 29.1 billion due to the recent lowering of the corporate tax rate in the United States.
Operating income declined, however, from 18% to 14,46 billion, affected by a rare loss of underwriting activities in insurance because of the hurricanes Harvey, Irma and Maria and also forest fires in California.
In the fourth quarter, the operating profit declined 24% to 3,34 billion but the net profit has increased almost fivefold to 32,55 billion, or $ 19.790 $ per Class A share, compared to 6,29 billion (3.823 dollars) a year earlier.
The book value per share, which measures assets minus liabilities, rose 13% in the fourth quarter, 211.750 dollars, and 23% on the year as a whole.
ABEL AND JAIN
The last major acquisition for Warren Buffett dates back to more than two years – the oem aerospace Precision Castparts redeemed for 32.1 billion dollars – and his advanced age leaves him with less time to track “elephants”, according to his expression.
Even so, Buffett and his good behaviour vice-chairman Charlie Munger, 94 years old, shows no signs of wear even if Berkshire was named last month two new vice-presidents seen as potential successors.
Gregory Abel, who was in charge until then, the subsidiary Berkshire Hathaway Energy, has now the responsibility of all non-core insurance activities, which employ a total of 330.000 people, for example in the railway company BNSF, or at the glacier Dairy Queen.
Ajit Jain, a specialist in insurance, oversees the subsidiary auto insurance Geico and other companies in the same domain, employing a total of 47,000 people.
“The blood of Berkshire flowing in their veins,” wrote Buffett about two promoted.
BUFFETT ADVISES THE ACTIONS, ALWAYS
Wells Fargo has not proven to be an investment happy these last few months due to scandals to repetition, but Apple has experienced a better fate.
In his letter, Buffett reveals that his shareholding of 3.3% in the manufacturer of the iPhone, a value of 28.2 billion dollars, resulted in a gain to the virtual of $ 7.25 billion by year-end.
Buffett delegates a part of its management activities to his deputies Todd Combs and Ted Weschler, who according to him were running together by the end of 2017 some $ 25 billion against $ 21 billion a year earlier.
The sage of Omaha has finally affirmed the long-term investors, pension funds up to the individual investor, that even with the equity markets at the highest it would be a “terrible mistake” to think that bonds are safer.
“Often, bonds of high rating in an investment portfolio increase the risk,” he wrote. “It is impossible to say how the stock may behave in the short term (…) But as you increase the investment horizon of the investor, a diversified portfolio of u.s. equity becomes progressively less risky than bonds, provided that they have been purchased at a level of reasonable valuation.”
“In America, the equity investor has the wind in the back”, he adds.
In 2010, Buffett had indicated that his death 90% of the money that he would leave his wife Astrid would be placed in a fund replicating the S&P-500 and 10% in government bonds.
(Véronique Tison for the French service)