Buffett touts economy amid record Berkshire profit

Saturday 27 February 2016 19.13
Warren Buffett makes no mention of who might succeed him at Berkshire in his annual letter to shareholders
Warren Buffett makes no mention of who might succeed him at Berkshire in his annual letter to shareholders

Warren Buffett today used his annual letter to Berkshire Hathaway shareholders to launch vigorous defences of a private equity firm and a mobile home unit that critics say employ controversial practices.

He also used the letter to lambaste politicians trying to talk down a still-growing economy. 

The billionaire also touched on a wide range of other issues in his widely-read annual letter, including Berkshire's record 2015 profit and called climate change a major problem. 

Now 85, Buffett made no mention of who might succeed him at Berkshire, which he has run for a half-century, but said in passing he expects to be around at age 100. 

The Nebraska-based company reported a record full-year profit of $24.08 billion, up 21%, while operating profit rose 5% to a record $17.36 billion. 

In the fourth quarter, profit rose 32% to $5.48 billion. Operating profit rose 18% to $4.67 billion, topping the average analyst forecast. 

Berkshire owns roughly 90 businesses in such areas as insurance, railroads, energy, food, apparel and real estate. Buffett's leadership has made him an investing legend, and the world's third-richest person according to Forbes magazine. 
             
But he has critics, and spent about 10% of his roughly 18,000-word letter defending 3G Capital, a Brazilian firm with which Berkshire owns a majority of Kraft Heinz, and Berkshire's Clayton Homes mobile home unit.

Many shareholders questioned Buffett's compatibility with 3G, an aggressive cost cutter led by Brazilian billionaire Jorge Paulo Lemann. 

Berkshire and 3G teamed up in 2013 to buy HJ Heinz and last year merged it with Kraft Foods. 

Buffett also helped finance 3G's merger of Burger King with Canadian donut chain Tim Hortons. Following these mergers, 3G cut thousands of jobs. 

Buffett acknowledged that while he and 3G "follow different paths" in running businesses, 3G has been "extraordinarily successful," and more ventures are possible. 

Clayton Homes has been faulted in articles in the Seattle Times for predatory lending and discrimination against, which the largest US mobile home builder denies. 

But Buffett called Clayton a careful lender, and said it has escaped major regulatory fines despite 65 state and federal reviews in the last two years. Management delivers "industry-leading performance," Buffett said. 
             
Buffett praised Berkshire's earnings power, saying that only a catastrophic terrorist attack on the US posed a "clear, present and enduring danger" to the company. 

A supporter of Democrat Hillary Clinton for the White House, Buffett also rejected as "dead wrong" the dour economic outlooks polluting the 2016 US presidential campaign. "Babies being born in America today are the luckiest crop in history," he wrote. 

Buffett urged shareholders to reject a proxy proposal that would require greater disclosures about how climate change might affect Berkshire's insurance businesses. 

"It seems highly likely to me that climate change poses a major problem for the planet," Buffett wrote. "But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries."
              
The report also noted Buffett's $2.6 billion loss as of December 31 in his investment in IBM, but said Berkshire has no intention of selling its IBM stock. 

Buffett also praised the work of top insurance executives Ajit Jain and Tad Montross, and called the hiring of Todd Combsand Ted Weschler, who each handle $9 billion of investments,"one of my best moves."
              
But Buffett also said he plans to be around on August 30, 2030, his 100th birthday, to announce that Berkshire's Geicounit has passed State Farm as the biggest US car insurer. 

"Mark your calendar," he wrote.