Warren Buffett’s Berkshire Hathaway (BRKa), (BRKb) has done it again – booking a 43 percent quarterly profit, the highest since fiscal 2007, on derivative gains and earnings from the acquisition of Burlington Northern Santa Fe, a purchase that Mr. Buffett said “it’s working out even better than I expected.”
In his latest Berkshire Hathaway letter to shareholders, Mr Buffett, known as the “Sage of Omaha” for his money-making ability, wrote fourth-quarter net income advanced to $4.38 billion, or $2,656 a share, from $3.06 billion, or $1,969, a year earlier. If that weren’t enough, the 80-year-old chief executive officer said that owning the second-biggest U.S. railroad will increase Berkshire’s “normal” earning power by nearly 40% pre-tax and by well over 30% after-tax. Mr. Buffett also said that Berkshire has replenished the $22 billion in cash it spent to buy the railroad.
“The economics of this transaction”, wrote Buffett, “have turned out very well.”
Mr. Buffett also wrote in his letter that buying and owning good businesses is Berkshire’s main focus, and that the company has $38 billion in total cash. Berkshire had net income of $13 billion last year, about 61% higher than in FY2009. The company also reported a 13% rise in book value. According to Mr. Buffett, his conglomerate last year spent more than $5 billion on property and equipment in the US and that the overwhelming part of Berkshire’s future investment will be at home.
“The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective,” he wrote.
“We are not natively smarter than we were when our country was founded nor do we work harder….Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.”
Mr. Buffett also told his shareholders that he was on the hunt for more acquisitions. “We will need both good performance from our current businesses and more major acquisitions. We’re prepared. Our elephant gun has been reloaded, and my trigger finger is itchy.”
Shares of Berkshire Hathaway, which peaked in Dec. 3, 2007 at $148.220 a share, closed Friday at $127,550. The per-share book value of both BRKa, BRKb stock increased by 13% in fiscal 2010. Over the last 46 years book value of the Omaha-based company has grown from $19 to $95,453, a rate of 20.2% compounded annually.
If you want to read Buffett’s letter, this link will take you to it.