Berkshire Hathaway says tax law gives it $29-billion boost

Berkshire Hathaway says tax law gives it $29-billion boost

Warren Buffett, Berkshire Hathaway Chairman and CEO, drinks a Cherry Coke as he tours the exhibit floor at the CenturyLink Center in Omaha, Neb., Saturday, May 6, 2017.

"In his early years, Jack was frequently mocked by the investment-management industry", Buffett said last year.

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

Buffett is synonymous with Berkshire Hathaway.

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"A large portion of our gain did not come from anything we accomplished at Berkshire", Buffett said. "In America, equity investors have the wind at their back". Year by year, we have moved forward.

Still, Seifert reminded clients that "the demise or incapability of Warren Buffett would be a negative for Berkshire shares". He noted, however, that only $36 billion came from Berkshire's business operations. All that cash earning little to nothing is a drag on the conglomerate's earnings power.

Berkshire was sitting on more than $109 billion in cash at the end of the third quarter of 2017. The compounded annual return over the last 53 years is 19.1%.

"Capital deployment is crucial to Berkshire's future earnings growth", Kai Pan, a Morgan Stanley analyst, told clients in a research note released Friday. They are struggling to put that money to work because of a "purchasing frenzy" by deal-hungry chief executives employing cheap debt that pushed "prices for decent, but far from spectacular, businesses" to "an all-time high".

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"Upon the enactment of the [Tax Cuts and Jobs Act of 2017], we recorded a reduction in our deferred income tax liabilities of approximately $35.6 billion for the effect of the aforementioned change in the USA statutory income tax rate".

The lower tax rate also contributed to a 23% full-year boost in Berkshire's book value, which measures assets minus liabilities and which Buffett considers a good indicator of Berkshire's net worth, to $211,750 per class A share. "If the rate were to drop 10%, that $9.5 billion is real".

Berkshire made headlines in January when it teamed up with Amazon and J.P. Morgan Chase and announced that it plans to form an independent health care company with the goal of lowering medical-related costs for its employees.

It's important to remember that even Buffett's Berkshire Hathaway (BRK-A, BRK-B) hasn't been immune to significant swings in its stock price either.

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The investor shared the data which revealed Berkshire Hathaway's stock declined by a range of 37 percent to 59 percent multiple times over the last five decades.

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