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Berkshire Hathaway 2013 March 14, 2014

Posted by shaferfinancial in Finance.
Tags: ,

Warren Buffett’s letter to stockowners was again insightful as to how Berkshire Hathaway is doing. However, I found it less interesting than previous letters and a little defensive in tone, for which he doesn’t need to do. I will outline the highlights here:

Berkshire made two major purchases [1/2 of Heinz and NV Energy] for a little over $30 Billion.
Mid American had $10.8 B in pre-tax earnings last year up around 8%
Smaller businesses had net earnings up around 20% last year
Berkshire made another underwriting profit [11 years in a row]
Berkshire spent $3.5B to acquire remaining shares of Marmon and Iscar
The two equity manager now invest $7B each and outperformed the S&P 500
Berkhsire increased ownership in American Express, Wells Fargo, Coca-cola and IBM
Investment value increased 13%
Earnings increased 12%
Book Value increased 18%
Float increased to $77B
Over $48B in cash and equivalents

So, it was another good year for Berkshire. Note they spent over $30B in investments and yet still have over $48B in cash. Berkshire produces cash at an amazing pace. This, of course, is both good and bad, good because it it what a business is suppose to do, and bad because it creates so much cash that Buffett has a hard time investing it for outsized returns.

My ownership of this stock goes back to 1997. I added on significantly over the next 12 years. I am pleased with my ownership. It is a very safer place to invest. However, it was such a high percentage of my portfolio [80%] that I am starting to sell some and replace it with dividend paying stocks. My ultimate goal is to live off of the dividends and Berkshire doesn’t pay them. I have now around 55% of my portfolio in Berkshire having sold a few shares when it went up over $124 [B shares]. Once again, this is about my strategy not any problem I see with Berkshire.

In 2013 the price rose 33%. Since the first of the year another 4.6%. I think it is fairly valued to a little low. I would not surprise me if it ran to around $200,000 [A share] or dropped down to the $170,000s again. The market is a little choppy now.



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