Berkshire Hathaway, the holding of American billionaire Warren Buffett, received a big check of 29 billion dollars in 2017 because of the tax reform adopted by the Trump administration, which drastically lowers taxes for businesses.
In its long-awaited annual letter to shareholders, the 87-year-old “oracle of Omaha” reports that the net gain on its company’s holdings was $ 65.3 billion in 2017.
“A lot of that portion does not come from what we did in Berkshire,” said Warren Buffett, one of the world’s most admired investors. “Only $ 36 billion comes from our operations, the remaining $29 billion was given to us in December when Congress rewrote the tax code.”
The tax reform officially lowers the US corporate tax rate from 35% to 21%, which has led many companies to change their accounting. Some of these changes have resulted in significant additional costs, while others, such as Berkshire Hathaway, have seen significant tax savings.
Mr. Buffett has never hidden his Democratic sympathies and regularly complains that he does not pay enough taxes in view of his wealth estimated at $ 86 billion by Forbes. Like other billionaires, he is committed to donating the bulk of his fortune to charitable works.
Berkshire Hathaway, his holding company, has interests in some fifteen major companies in various sectors of the US economy ranging from finance to energy to insurance and air transport: American Express, Apple, Bank of America America, Charter Communications, Coca-Cola, Delta Air Lines, General Motors, Goldman Sachs, Moody’s, Wells Fargo, Southwest Airlines …
Last year, Berkshire Hathaway’s net income increased from $ 24.07 billion in 2016 to $ 44.94 billion at December 31.
The company has also seen its war chest increase: it had 116 billion in cash and US treasury at the end of 2017, a windfall that Warren Buffett would use to expand his portfolio through acquisitions.
The legendary investor, whose savvy investments are under close scrutiny, says he needs “one or more big acquisitions” to boost Berkshire Hathaway’s profitability but fears he will have to wait because the prices charged are not reasonable.
“Prices for decent, far from spectacular activities have reached record levels, as prices are almost irrelevant to a legion of optimistic buyers,” Warren Buffett laments.
The blame, he explains, is the current business environment, especially Wall Street, which encourages big bosses to sign big checks for acquisitions without even worrying about their real value.
The very low cost of debt also contributes to fuel the buying fever, with many companies taking on debt to finance their transactions.
“It’s crazy to risk what you have and what you need to get what you do not need,” says the billionaire, symbol of the success of a long-term investment policy.
Warren Buffett has not made a major acquisition since the purchase in 2015 for more than $ 32 billion from aeronautical equipment manufacturer Precision Castparts.
Relying on tax reasons, he has always been reluctant to use the excess liquidity of Berkshire Hathaway to spoil shareholders with big dividends.
In January, he began preparing for his estate by appointing two dolphins, Gregory Abel, 55, and Ajit Jain, 66, to the board. Warren Buffet and Charles Munger, 94, his long-time business partner, have retained their responsibilities for the time being.