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Buffett having trouble finding stocks to buy
Billionaire investor releases his annual letter to shareholders of Berkshire Hathaway. The dollar's fall and overpriced companies worry him most.
Berkshire Hathaway, the holding company run by billionaire investor Warren Buffett, said on Saturday that profit nearly doubled in 2003, as rising premiums boosted its insurance businesses and foreign currency and junk bond investments gained value.
The Omaha, Neb.-based company, whose patchwork of businesses includes Geico, Dairy Queen and Fruit of the Loom, said it earned $8.15 billion, or $5,309 per share in 2003, compared with $4.29 billion, or $2,795 per share, a year earlier.
``Insurance did well and some of the other businesses had the best years ever,'' said Matt Sauer, a portfolio manager at Oak Value Fund, which has $250 million in assets and lists Berkshire as its largest holding. ``Those were the businesses that benefited from home construction and home remodeling in America.''
Berkshire Hathaway's (BRK.A, news, msgs) building-materials businesses include Acme Brick and Benjamin Moore, the paint company.
Dollar's fall worries Buffett
Berkshire revenue rose 51 percent to $63.86 billion, helped by its acquisition of grocery distributor McLane Co. from Wal-Mart Stores (WMT, news, msgs).
Berkshire said after-tax investment gains rose to $2.73 billion in 2003 compared with $566 million in 2002. Partially contributing to this was Buffett's decision to buy foreign currency as the U.S. dollar sharply weakened.
``As an American, I hope there is a benign ending to this problem,'' Buffett wrote of the dollar's decline in his annual letter to shareholders. He said the fall could cause problems that reach ``well beyond currency markets.''
Bargain hunter
Buffett's $8 billion investment in junk bonds in 2002 also paid off, though Buffett, known as a bargain hunter, stopped buying as prices rose. ``Yesterday's weeds are today being priced as flowers,'' he wrote in his letter.
Berkshire's portfolio of U.S. government debt gained, as did his collection of common stocks such as American Express (AXP, news, msgs), Coca-Cola (KO, news, msgs) and ((Gillette)).
Buffett was last month named the world's second richest person by Forbes magazine, which estimated his net worth at $42.9 billion. Most of that is in Berkshire stock.
No stocks worth buying
The large profit added even more to the immense cash stockpile Buffett has to buy stocks, bonds or companies themselves. The company said it had $35.96 billion of cash at the end of 2003, nearly triple the $12.75 billion a year earlier.
Buffett reiterated that he has trouble finding stocks to buy. ``In recent years, however, we've found it hard to find significantly undervalued stocks, a difficulty greatly accentuated by the mushrooming of the funds we must deploy,'' Buffett wrote.
Sauer of Oak Value said he was confident Buffett will eventually put his cash to good use. ``He doesn't let his cash dictate his investment policy, he lets the investment scenario dictate his investment policy,'' Sauer said,
Berkshire's per share earnings are unusually high because the company has relatively few shares outstanding, and Buffett has never split the company's ``A'' shares. Each ``A'' share closed on Friday on the New York Stock Exchange at $93,600.
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