Warren Buffett annual letter: Berkshire Hathaway just made a record profit thanks to US tax changes
Berkshire Hathaway, the business headed up by legendary investor Warren Buffett, today reported a record annual profit after Donald Trump’s tax changes boosted its earnings by more than $29bn (£21bn).
The figures
The company’s full-year earnings shot up 87 per cent to $44.9bn, though Buffett admitted only $36bn came from Berkshire’s operations.
Operating profit fell 18 per cent to $14.5bn due to a $2.2bn loss from the group’s insurance underwriting unit as a string of natural disasters hit the US.
On Friday, Berkshire’s Class A shares closed at $304,020.01, having risen above $300,000 a share for the first time ever in December on expectations that Trump’s US tax overhaul would pass into law.
Why it’s interesting
Berkshire said about $29.11bn of its net income was attributable to the reduction of the US corporate tax rate from 35 per cent to 21 per cent.
Buffett recognised this in his annual letter to shareholders, where he said the company’s 2017 results were “far from standard”.
Buffett said:
A large portion of our gain did not come from anything we accomplished at Berkshire
However, he added that the $65bn gain was “nonetheless real – rest assured of that”.
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What Buffett said
Elsewhere in his letter, Buffett said a lack of “sensible” purchase prices had prevented Berkshire Hathaway from making acquisitions in 2017.
“Prices for decent, but far from spectacular, businesses hit an all-time high,” he said. Though many firms continued a “purchasing frenzy” due to deal-hungry chief execs and cheap debt, he said.
He said:
Despite our recent drought of acquisitions, Charlie and I believe that from time to time Berkshire will have opportunities to make very large purchases. In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own
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