Value of Buffett's Berkshire Jumps 13 Percent on Trump Tax Cut

Gladys Abbott
February 25, 2018

The new law, greatly touted by President Donald Trump, lowered the tax rate paid by USA corporations from 35 percent to 21 percent, allowing many to undertake major new outlays and others to book significant fiscal gains.

Berkshire attributed roughly $29.11 billion of its net income to the reduction of the US corporate tax rate, to 21 percent from 35 percent, that President Donald Trump signed into law in December.

"A large portion of our gain did NOT come from anything we accomplished at Berkshire", he wrote.

However, he added that the $65bn gain was "nonetheless real - rest assured of that".

The company's full-year earnings shot up 87 per cent to $44.9bn, though Buffett admitted only $36bn came from Berkshire's operations.

"The remaining $29 billion was delivered to us in December when Congress rewrote the U.S. Tax Code", he explained.

Finding things to buy at a "sensible purchase price" had become a challenge, he wrote, and a major reason Berkshire was awash with $116bn of low-yielding cash and government bonds.

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But he said that a debt-fueled "purchasing frenzy" binge by deal-hungry chief executives is making that task very hard. Unlike many tech conglomerates, which had parked their cash overseas, Berkshire Hathaway's cash was in America.

Warren Buffett released his annual letter to shareholders Saturday, saying a large portion of Berkshire Hathaway's 2017 gains came from nothing the company did, but came from the federal tax overhaul passed previous year. "For that to happen, we will need to make one or more huge acquisitions".

The problem facing Berkshire, whose last major acquisition was a $32 billion deal to buy Precision Castparts in 2015, is that prices are not cheap and competition from other buyers, such as private equity firms, is stiff, says Pan.

" Buffett singled out newly designated vice chairmen Ajit Jain and Greg Abel, longtime operating company executives, Jain with the insurance business and Abel with the company's energy businesses".

With their appointments, some Berkshire prognosticators have said either man could now be in the running to one day take the top role at Berkshire, when Buffett, 87, no longer holds it. Many investors consider Abel, a decade younger than Jain, the frontrunner.

His latest newsletter reports that Berkshire's net earnings rose a year ago from $24.07 billion to $44.94 billion.

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