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Lower tax rate fuels record profit for Buffett's Berkshire

Lower tax rate fuels record profit for Buffett's Berkshire

In his much-anticipated annual letter to shareholders, Buffett explained that the company's net gain of $65.3 billion in 2017 was only partly due to his employees' efforts.

Buffett says many businesses have overpaid for acquisitions in the past year because of that kind of optimistic attitude.

"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", Buffett said.

So Berkshire held almost $116 billion in cash and short-term bonds at year end.

The company's often-impressive pace of acquisitions had slowed previous year, he noted, when the prices asked for businesses 'hit an all-time high, ' amid what he called 'a purchasing frenzy'. "Berkshire's goal is to substantially increase the earnings of its non-insurance group".

Berkshire Hathaway didn't make many big acquisitions in 2017 because asking prices were so high. "We certainly have the resources to do so", he wrote.

The letter was considerably shorter than in recent years, a little over 8,000 words compared with more than 14,000 last year, and did not discuss major Berkshire stock holdings such as Apple Inc AAPL.O and Wells Fargo & Co WFC.N .

Buffett urged investors to stick with stocks even though they can be riskier in the short-term.

Berkshire also owns clothing, furniture and jewelry firms.

Warren Buffett released his annual letter to shareholders Saturday, saying a large portion of Berkshire Hathaway's 2017 gains came from nothing the company did, but came from the federal tax overhaul passed past year. The book value, which Buffett encourages as a use of valuing a Berkshire investment, increased 23 percent per share.

Gregory Abel, who had run Berkshire Hathaway Energy, is now overseeing Berkshire's non-insurance businesses such as the BNSF railroad and Dairy Queen ice cream, all of which employ 330,000 people, while insurance specialist Ajit Jain oversee the Geico auto insurer and other insurance businesses, employing 47,000.

'Only $36 billion came from Berkshire's operations, ' he wrote.

"Each has been with Berkshire for decades, and Berkshire's blood flows through their veins", Buffett wrote.

The company's full-year earnings shot up 87 per cent to $44.9bn, though Buffett admitted only $36bn came from Berkshire's operations.

Buffett also said that while Berkshire's insurance holdings would take a $2 billion after-tax hit from losses caused by hurricanes a year ago in Florida, Texas and Puerto Rico, other reinsurance companies did far worse.

Insurance float, or premiums collected before claims are paid, which gives Buffett more money to invest, was about $114bn at year end.

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