Buffett upbeat about future despite trailing S&P


Warren Buffett, Chairman of the Board and CEO of Berkshire Hathaway, poses for a portrait in New York. (Carlo Allegri/Reuters)
March 1, 2014

— Billionaire Warren Buffett is confident that Berkshire Hathaway will be a mainstay of the U.S. economy for 100 years, regardless of whether it sometimes underperforms bull market runs, as it did last year.

In his annual letter to shareholders released Saturday, Buffett, 83, did not disclose new information on Berkshire’s plans for succession once he leaves someday. But he emphasized that the company he has led for 49 years is built on a “rock-solid foundation” and will endure long after he’s gone.

“A century hence, BNSF [Burlington Northern Santa Fe Railroad] and MidAmerican Energy will still be playing major roles in our economy,” Buffett wrote. “Insurance will concomitantly be essential for both businesses and individuals — and no company brings greater human and financial resources to that business than Berkshire.”

In 2013, Berkshire spent about $18 billion to buy NV Energy and about half of foodmaker H.J. Heinz, and paid $3.5 billion to buy out the rest of two manufacturing firms, Marmon and Iscar. Subsidiaries committed to spend $3.1 billion on 25 other smaller acquisitions. Berkshire sits on about $48 billion in cash and owns 81 / 2 businesses big enough to be part of the Fortune 500 if they were separate companies.

“Only 4911 / 2 to go,” Buffett quipped.

Buffett said he and Berkshire Vice Chairman Charlie Munger will continue to look for investments and acquisitions that will allow them to bet on the future of the American economy.

“Charlie and I have always considered a bet on ever-rising U.S. prosperity to be very close to a sure thing,” Buffett wrote. “Indeed, who has ever benefited during the past 237 years by betting against America?”

He suggested that the Heinz deal, which Berkshire bought along with private equity firm 3G Capital, could prove to be a model for some future acquisitions. Typically in the past, Berkshire has bought entire companies itself.

Berkshire’s net income surged 31 percent to $19.48 billion last year on revenue of $182.15 billion.

“On the operating front, just about everything turned out well for us last year — in some cases very well,” Buffett wrote.

Buffett’s preferred measure of Berkshire’s performance has been growth in book value (its assets minus liabilities), though he says the company’s intrinsic value is much higher. Berkshire’s book value gained 18.2 percent in 2013, but couldn’t match the S&P 500 index’s 32.4 percent run-up. That marks the fourth year out of the past five that the company has underperformed the S&P.

Associated Press

Comments
Show Comments

Sign up for Today's Headlines

Start every morning with the most important stories.

Most Read Business