US INVESTOR Warren Buffett has said his “trigger finger is itchy” for takeovers after cash holdings at his Berkshire Hathaway Inc climbed to $38.2 billion (€27.8 billion).
“Our elephant gun has been reloaded,” Buffett said in his annual letter to shareholders.
Berkshire needs “good performance from our current businesses and more major acquisitions”, he said after the company reported a 43 per cent gain in fourth-quarter profit on derivative bets and earnings from its Burlington Northern Santa Fe railroad.
Buffett is seeking takeovers after Berkshire’s $13 billion 2010 profit increased the firm’s resources and near record-low interest rates limited the returns available in fixed-income markets.
Buffett completed his biggest takeover, the $26.5 billion Burlington purchase, last February. Since then he’s said he’ll consider deals outside the US.
“He reloads at a rapid rate,” said Thomas Russo, a partner at Gardner Russo and Gardner, who has about 10 per cent of his $4 billion under management invested in Omaha, Nebraska-based Berkshire. “The hunt for new investments, and wholly owned ones, I don’t think slows down whatsoever.”
Berkshire’s fourth-quarter net income rose to $4.38 billion from $3.06 billion. The profit for full-year 2010 was up 61 per cent from 2009. Berkshire has advanced 5.9 per cent on the New York Stock Exchange this year, beating the 4.9 per cent advance in the Standard and Poor’s 500 Index.
Buffett (80) outlines his investing approach in his letters and opines about economics, executive compensation and government policies. His annual communications with shareholders have won him a following of professional money managers and the moniker “the Oracle of Omaha”.
“Commentators today often talk of “great uncertainty”, Buffett wrote. “Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born.”
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.
Acquisitions may help Buffett increase earnings for Berkshire as investment income at the company’s insurance subsidiaries slide. Investment income produced by units including reinsurer General Re and car coverage specialist Geico fell 5.9 per cent in 2010 to $5.19 billion.
Buffett warned in the letter about the perils of leverage. “By being so cautious in respect to leverage, we penalise our returns by a minor amount,” Buffett wrote. “Having loads of liquidity, though, lets us sleep well.” – (Bloomberg)
