Warren Buffett Still Has Plenty of Confidence in the American Economy

Warren Buffett Still Has Plenty of Confidence in the American Economy

Warren Buffett, Berkshire Hathaway Chairman and CEO, drinks a Cherry Coke as he tours the exhibit floor at the CenturyLink Center in Omaha, Neb., Saturday, May 6, 2017.

The investment company run by Warren Buffett made $44.9 billion of earnings attributable to shareholders during the year, but warned that changes to the way changes in valuation were booked for its $170 billion of tradable stocks would make comparisons "useless" in future.

Buffett reported $29 million tax gains in Berkshire's annual earnings from a change in USA tax rules. Buffett details in his annual letter the many business activities that led to that gain - including, he writes, investments in American companies, which helped Berkshire's non-insurance businesses realize a $950 million gain in pre-tax income over 2016. Cash has been piling up at Berkshire, but Buffett said most of the businesses he looked to buy a year ago were too expensive.

"Buffett doesn't dwell very long on the politics", Smead said. Unlike many tech conglomerates, which had parked their cash overseas, Berkshire Hathaway's cash was in America. After all, even a high-priced deal will usually boost per-share earnings, if it is debt-financed.

The problem facing Berkshire, whose last major acquisition was a $32 billion deal to buy Precision Castparts in 2015, is that prices are not cheap and competition from other buyers, such as private equity firms, is stiff, says Pan.

To find Buffett's full shareholders' letter, go here. The Omaha, Nebraska-based conglomerate's insurance businesses, however, posted a rare underwriting loss.

"In our search for new stand-alone businesses, the key qualities we seek are durable competitive strengths; able and high-grade management; good returns on the net tangible assets required to operate the business; opportunities for internal growth at attractive returns; and, finally, a sensible purchase price", wrote Buffett.

As for succession, there were no hints given, though Buffett did take time to praise Ajit Jain and Greg Abel - the two thought to be the frontrunners.

"It is a awful mistake for investors with long-term horizons - among them, pension funds, college endowments and savings-minded individuals - to measure their investment "risk" by their portfolio's ratio of bonds to stocks", Buffett wrote. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. And it holds major investments in such companies as Coca-Cola Co., Apple and Wells Fargo & Co.

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