With $116 billion cash, Warren Buffett says Berkshire needs 'huge acquisitions'

Feb 25, 2018, 00:15
With $116 billion cash, Warren Buffett says Berkshire needs 'huge acquisitions'

The renowned investor used his letter to shareholders to blame high valuations for Berkshire's recent "drought" of deals but revealed that Donald Trump's tax cuts had provided a $29bn boost to its war chest to help make "huge acquisitions" this year. "Our smiles will broaden when we have redeployed Berkshire's excess funds into more productive assets", Buffett wrote.

The rest was a gift from the new USA tax code.

Investor Warren Buffett says the acquisition frenzy on Wall Street is making it hard for him to find deals at the right price, but his Berkshire Hathaway conglomerate recorded a $29 billion gain because of the tax reforms Congress passed.

Warren Buffett published his annual letter on Saturday, and it came with some of the usual trimmings: sage advice and reflections on the past year's success.

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The billionaire and CEO of Berkshire Hathaway highlighted a $29 billion tax gain for his company, bemoaned a lack of good deals and reminded his readers that owning stocks through low-priced index funds was the best way to build wealth over time.

Berkshire's cash pile swelled to $116 billion from $109 billion in the third quarter. He admitted that the struggle in finding a "sensible purchase price" had "proved a barrier to virtually all deals" a year ago.

Two men are widely considered the frontrunners: Greg Abel, CEO of Berkshire Hathaway Energy Company, and Ajit Jain, executive vice president of Berkshire Hathaway's National Indemnity Company insurance subsidiary.

Wells Fargo and Apple were at the top of the list. Berkshire also owns scores of businesses that it has acquired over the years: auto insurer Geico, Dairy Queen and BNSF Railway Company. Or lower the bar he has set to buy back company stock, paving the way for a share buyback announcement? Berkshire's "A" shares also became the first stock ever to reach a price of $300,000.

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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.

Buffett urged investors to stick with stocks even though they can be riskier in the short-term. That ended previous year, 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.

"We expect Buffett's annual letter to reassure investors that his health remains remarkable and he intends to be around for awhile", said Cathy Seifert, equity analyst at CFRA Research in NY.

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