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 "America's best days lie ahead," Buffett, 83, said in his annual
letter to Berkshire shareholders.
"Charlie and I have always considered a 'bet' on ever-rising U.S.
prosperity to be very close to a sure thing," he added, referring to
his 90-year-old vice chairman Charlie Munger. "Though we invest
abroad as well, the mother lode of opportunity resides in America."
The annual letter is widely read not just by Berkshire shareholders,
but by investors and others looking for wisdom and guidance from the
so-called Oracle of Omaha, the world's fourth-richest person.
Buffett has run Berkshire since 1965, and the Omaha, Nebraska-based
company now has more than 80 businesses in such areas as insurance,
railroads, utilities and ice cream. It also owns more than $117.5
billion of stocks.
Buffett again signaled that he has no plans to leave his company
soon, telling shareholders he intends in next year's letter to
review his first 50 years at Berkshire, and what the future may
bring.
RECORD PROFIT
Full-year profit rose 31 percent to $19.48 billion, or $11,850 per
Class A share, while operating profit rose 20 percent to $15.14
billion, or $9,211 per share.
For the fourth quarter, net profit rose nearly 10 percent to $4.99
billion, or $3,035 per share, and operating profit rose 34 percent
to $3.78 billion, or $2,297 per share.
Berkshire's book value per share, Buffett's preferred yardstick for
measuring net worth, grew 18.2 percent after taxes in 2013 to
$134,973.
Despite that, the 2009-to-2013 period marked the first time since
Buffett took over Berkshire that book value per share rose more
slowly over five years than the Standard & Poor's 500 including
dividends on a pre-tax basis.
Berkshire's per share net worth was up about 91 percent during that
period, while the index gained about 128 percent.
Net worth per share has nonetheless grown at 19.7 percent annual
clip under Buffett since 1965, when it was a mere $19. The S&P 500
annual growth rate was just 9.8 percent.
Buffett said he remains on the prowl for more big acquisitions,
which he calls "elephants," after two recent big purchases: a $5.6
billion acquisition of Nevada utility NV Energy by Berkshire's
MidAmerican Energy unit, and a $12.25 billion investment in ketchup
maker H.J. Heinz Co.
He said future purchases could follow the "partnership" structure he
used when teaming up with Brazil's 3G Capital to buy Heinz. Buffett
also said Berkshire's 50 percent Heinz stake could grow if 3G
investors decide to sell their shares to him.
Berkshire ended last year with $48.19 billion of cash and
equivalents, giving Buffett the freedom to make big acquisitions and
retain a $20 billion cushion.
Munger told Reuters last year that Berkshire would be "stark raving
mad" not to pursue another giant acquisition, but that it was
difficult to do so because low interest rates had pushed up takeover
prices.
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Thomas Russo, a partner at Gardner Russo & Gardner in Lancaster,
Pennsylvania, who oversees around $9 billion with about 11 percent
of that in Berkshire, said Munger and Buffett have the luxury "to do
nothing" until opportunities arise, which strengthens Berkshire's
strategy.
In the fourth quarter, Berkshire was a net seller of stock,
selling $191 million more than it bought.
While Berkshire is known for its insurance businesses, Buffett has
been acquiring businesses in other, sometimes boring sectors that
are capable of steadily boosting revenue.
He said profit from a "Powerhouse Five" of large non-insurance unit — the BNSF railway, Iscar for metalworking, Lubrizol for chemicals,
Marmon for industrial products, and MidAmerican Energy — might
boost pre-tax profit in 2014 by $1 billion from the $10.8 billion
they collected in 2013.
BUFFETT GETS BEATEN
Buffett also heaped praise on portfolio managers Todd Combs and Ted
Weschler, who help choose stocks for Berkshire and now each invest
more than $7 billion.
"I must again confess that their investments outperformed mine.
(Charlie says I should add 'by a lot.')," Buffett said, referring
again to Munger. "Their contributions are just beginning: Both men
have Berkshire blood in their veins."
Berkshire's succession plan calls for Buffett's responsibilities to
be split in three after he leaves. Buffett's son Howard would become
non-executive chairman, and others would serve as chief executive
officer and chief investment officer.
Buffett has not said who the candidates for the CEO position are,
except that they all work at Berkshire and are men.
In the letter, Buffett again praised the work of insurance executive
Ajit Jain, who he called an "idea factory," and called MidAmerican
Chief Executive Greg Abel and BNSF Chairman Matthew Rose, as well as
new BNSF CEO Carl Ice, "extraordinary managers."
He also said Tad Montross, the head of the General Re reinsurance
unit, has turned a business that Buffett once thought he had made a
"huge mistake" in buying into a "gem."
Berkshire's Class A shares closed at $173,708 on Friday, and its
Class B shares closed at $115.78. The A shares have fallen 2.4
percent this year.
(Reporting by Luciana Lopez and Jonathan
Stempel; editing by Jennifer Ablan and Marguerita Choy)
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