NEW YORK (Reuters) – Warren Buffett on Saturday lamented his lack of ability to seek out massive corporations to purchase and stated his objective is to make “one or more huge acquisitions” of non-insurance companies to bolster outcomes at his conglomerate Berkshire Hathaway Inc.
In his annual letter to Berkshire shareholders, Buffett stated discovering issues to purchase at a “sensible purchase price” has grow to be a problem and is a serious purpose Berkshire is awash with $116 billion of low-yielding money and authorities bonds.
Buffett stated a “purchasing frenzy” binge by deal-hungry chief executives using low cost debt has made that activity troublesome. Berkshire sometimes pays all money for acquisitions.
“Our smiles will broaden when we have redeployed Berkshire’s excess funds into more productive assets,” Buffett wrote. “Berkshire’s goal is to substantially increase the earnings of its non-insurance group. For that to happen, we will need to make one or more huge acquisitions.”
The letter was significantly shorter than in recent times, slightly over eight,000 phrases in contrast with greater than 14,000 final yr, and didn’t talk about main Berkshire inventory holdings resembling Apple Inc and Wells Fargo & Co. Buffett typically invests in shares when he can’t discover entire corporations to purchase.
It was additionally brief on faulting excesses of Wall Street and Washington, and stated nothing about Berkshire’s plan to create a healthcare firm with Amazon.com Inc and JPMorgan Chase & Co.
At age 87, “he doesn’t want to make any enemies,” stated Bill Smead, chief government of Smead Capital Management in Seattle, a Berkshire investor.
Berkshire additionally posted a report $44.94 billion annual revenue, although $29.1 billion stemmed from the slashing of the U.S. company tax fee, which decreased the Omaha, Nebraska-based conglomerate’s deferred tax liabilities. Book worth per share, measuring belongings minus liabilities, rose 23 % in 2017.
It has been greater than two years since Buffett made a serious buy, the $32.1 billion takeover of plane elements maker Precision Castparts Corp, and his advancing age provides him much less time to seek out extra of the “elephants” he prefers.
But he has given himself and longtime Vice Chairman Charlie Munger, 94, extra freedom to concentrate on investing and allocating capital.
Neither has signaled any intention of stepping down quickly, although Berkshire final month named two further vice chairmen who might ultimately succeed Buffett as chief government.
Gregory Abel, who had run Berkshire Hathaway Energy, is now overseeing Berkshire’s non-insurance companies such because the BNSF railroad and Dairy Queen ice cream, all of which make use of 330,000 individuals, whereas insurance coverage specialist Ajit Jain oversee the Geico auto insurer and different insurance coverage companies, using 47,000.
“Berkshire’s blood flows through their veins,” Buffett wrote.
While the Wells Fargo funding has struggled in current months due to scandals over the way it treats clients, Apple has carried out higher.
Buffett revealed in his letter that Berkshire was sitting at yr finish on a $7.25 billion paper revenue on what has develop into a three.three % stake within the iPhone maker, value $28.2 billion.
Some Berkshire inventory investments are made by deputies Todd Combs and Ted Weschler, who Buffett stated collectively handle about $25 billion, up from $21 billion a yr in the past.
Buffett additionally warned long-term buyers together with pension funds, school endowments and “savings-minded individuals” that even with U.S. inventory costs close to document highs, it will be a “terrible mistake” to imagine bonds are safer.
“Often, high-grade bonds in an investment portfolio increase its risk,” he wrote.
Fourth-quarter internet revenue quintupled to $32.55 billion, or $19,790 per Class A share, from $6.29 billion, or $three,823 per share, a yr earlier.
Operating revenue, which Buffett considers a greater gauge of efficiency, fell greater than analysts anticipated within the fourth quarter, and slid 18 % for the yr to $14.46 billion.
Full-year outcomes suffered from Berkshire’s first full-year insurance coverage underwriting loss since 2002, harm by Hurricanes Harvey, Irma and Maria and wildfires in California.
Even so, insurance coverage float, or premiums collected earlier than claims are paid, and which give Buffett extra money to take a position, rose 25 % final yr, to $114.5 billion.
Reporting by Trevor Hunnicutt and Jonathan Stempel; Editing by Jennifer Ablan and Diane Craft