Published: Sun, February 25, 2018
Finance | By Kristine Clayton

With $116 billion cash, Warren Buffett says Berkshire Hathaway needs 'huge acquisitions'

With $116 billion cash, Warren Buffett says Berkshire Hathaway needs 'huge acquisitions'

Back in May 2017 at the most recent Berkshire Hathaway annual meeting, Buffett had hinted at how a potential tax cut could impact the bottom line of the company.

In this May 5, 2014 file photo, Berkshire Hathaway Chairman and CEO Warren Buffett gestures during an interview with the Fox Business Network in Omaha, Neb.

Buffett had a mixed reaction to the tax overhaul passed by Congress past year.

Investors looking for more details on Buffett's successor, however, got no fresh insights.

Abel and Tracy Cool, chief executive of Berkshire's unit, Pampered Chef, are the other Berkshire representatives on Kraft's board.

Buffett is synonymous with Berkshire Hathaway. "Our smiles will broaden when we have redeployed Berkshire's excess funds into more productive assets", Buffett wrote.

Kraft Heinz Co said on Friday billionaire investor Warren Buffett has made a decision to retire from the company's board following the end of his term in April to reduce travel commitments. "Nevertheless we think this move (to elevate Abel and Jain) should allay concerns over succession planning at Berkshire". "Yet Berkshire shares have suffered four truly major dips", he wrote.

He noted that Berkshire didn't go on a buying "frenzy" and acquire a bunch of companies past year, mostly because there were no desirable options that came at a "sensible" purchase price. All that cash earning little to nothing is a drag on the conglomerate's earnings power. Berkshire typically pays all cash for acquisitions.

Buffett predicted the company's stock will fall again by similar large declines in the next 53 years.

"Capital deployment is crucial to Berkshire's future earnings growth", Kai Pan, a Morgan Stanley analyst, told clients in a research note released Friday.

But he said the prices asked for businesses past year "hit an all-time high", and Berkshire will be looking for those available at "a sensible purchase price".

Berkshire on Saturday reported a record quarterly and annual profit, both of which received a $29.1 billion boost from the recent lowering of the US corporate income tax rate, which reduced its deferred tax liabilities.

With the exception of insurance, companies owned by Berkshire Hathaway increased their pre-tax profit by $950 million to $20 billion for the year, of which nearly half came from railway operator BNSF and Berkshire Hathaway Energy.

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