Warren Buffett said he’s looking for "more major acquisitions" after the economic recovery and the purchase of the Burlington Northern Santa Fe railroad helped increase fourth-quarter profit at his Berkshire Hathaway Inc.
"Our elephant gun has been reloaded, and my trigger finger is itchy," Buffett said of the outlook for deals in his annual letter to shareholders on Feb. 26. Omaha, Nebraska-based Berkshire reported a 43% gain in profit in the three months ended Dec. 31. The company’s cash holdings rose to $38.2 billion U.S. at year-end, the highest in three years, compared with $34.5 billion U.S. as of Sept. 30.
Buffett, 80, is seeking takeovers as economic expansion boosts results at Berkshire’s subsidiaries and near record-low interest rates limit the returns available in fixed-income markets. Net income in the three months ended Dec. 31 surged to $4.38 billion U.S., Berkshire’s highest quarterly profit since 2007.
Buffett, Berkshire’s chairman and chief executive officer, completed his biggest takeover, the $26.5-billion U.S. Burlington Northern purchase, last February. The unit contributed $1.03 billion U.S. to earnings in the fourth quarter.
Book value, a measure of assets minus liabilities, rose in the last three months of 2010 to $157.3 billion U.S. from $149.7 billion U.S. on Sept. 30 as earnings and stock advances boosted capital. Berkshire, whose operating units span power production and freight hauling as well as consumer goods and insurance, said full-year earnings were boosted by gains at toolmaker Iscar Metalworking Cos. and NetJets, the luxury flight unit.
The profit increase halts Berkshire’s streak of quarterly earnings declines at two. Net income fell in the second and third quarters of 2010 as derivative bets soured. In the fourth quarter, Berkshire booked a $2.49-billion U.S. gain on Buffett’s derivative wager on an advance in global stock indexes. Some results were calculated by subtracting figures for the first nine months of 2010 from the full-year data provided Feb. 26.
Acquisitions may help boost earnings as investment returns at Berkshire’s insurance subsidiaries slide. Investment income produced by units including reinsurer General Re and car coverage specialist Geico fell 5.9 percent in 2010 to $5.19 billion. Buffett said that may decline further in 2011 as investments he made during the credit crisis mature.
The yield on two-year U.S. Treasuries fell to a record low of 0.31% on Nov. 4 before rising to 0.71% on Feb. 25. The two-year note’s average yield over the last 10 years was more than 2.5%.
Goldman Sachs Group Inc. and General Electric Co. will probably return the $8 billion U.S. that Buffett invested in 2008 for preferred securities paying 10%, Buffett said.
Berkshire has climbed 5.9% this year on the New York Stock Exchange through Feb. 25, beating the 4.9% advance of the S&P 500.
Buffett, who refers to Berkshire’s stockholders as "owners," shuns quarterly conference calls with analysts and institutional investors, preferring to communicate by sending the letter and taking questions at the company’s annual meeting.
