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Investor Warren Buffett says good deals tough to find

25 February 2018

Billionaire Warren Buffett still has plenty of confidence in the American economy, according to his annual letter to Berkshire Hathaway shareholders. "Only $36 billion came from Berkshire's operations".

Berkshire Hathaway's fourth-quarter profit more than quadrupled as it received a $29 billion boost from the new tax law that easily offset any weakness in the company's businesses.

Investor Warren Buffett says Wall Street's lust for deals has prompted CEOs to act like oversexed teenagers and overpay for acquisitions, so it has been hard to find deals for Berkshire Hathaway.

Still, when asked if he would have encouraged legislators to support or fight it, Buffett said he would have gone with a different bill.

On acquisitions, too-high prices were a barrier to almost all deals Berkshire looked at past year, says Buffett. And just how did TCJA, as Berkshire abbreviates it, do so much for the company?

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The remuneration was, however, heavily boosted by the award of shares when the company listed on the stock market. That's also the question that put an end to Snap's financial growth.

Edward Jones analyst Jim Shanahan said he expected Buffett to devote more of the letter to explaining his decision to promote and name the top two candidates to eventually succeed him as Berkshire's CEO.

"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", wrote Buffett.

He admitted that the struggle in finding a "sensible purchase price" had "proved a barrier to virtually all deals" a year ago. Buffett briefly mentioned that move in two paragraphs at the very end of his letter. The 87-year old reiterated that while he's "never felt better", the company has a succession plan in the works. Many investors consider Abel, a decade younger than Jain, the frontrunner.

The Oracle of Omaha made a winning 10-year bet with Protégé Partners in December 2007 that the S&P 500 would outperform a basket of fund of hedge funds.

"It is a bad mistake for investors with long-term horizons - among them, pension funds, college endowments and savings-minded individuals - to measure their investment "risk" by their portfolio's ratio of bonds to stocks", Buffett wrote. A willingness to look unimaginative for a sustained period - or even to look foolish - is also essential. We also hold it today after a million or so "partners" have joined us at Berkshire. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.

Investor Warren Buffett says good deals tough to find