Warren Buffett says Berkshire needs to do 'huge acquisitions'


She is a longtime friend of Warren Buffett's, the pro bono editor of his annual letter to shareholders, and a Berkshire Hathaway shareholder. But, he disclosed with obvious regret, only $36 billion of that total came from Berkshire's operations.

"A large portion of our gain did not come from anything we accomplished at Berkshire", he wrote, adding that about $29 billion of that $65.3 billion gain came from changes to the tax law. Buffett details in his annual letter the many business activities that led to that gain - including, he writes, investments in American companies, which helped Berkshire's non-insurance businesses realize a $950 million gain in pre-tax income over 2016.

Warren Buffett on Saturday lamented his inability to find big companies to buy, and said his goal is to make "one or more huge acquisitions" of non-insurance businesses to bolster results at his conglomerate Berkshire Hathaway Inc.

"Price seemed nearly irrelevant to an army of optimistic purchasers", Buffett said.

"There is simply no telling how far stocks can fall in a short period", Buffett said.

Berkshire's cash pile swelled to $116 billion from $109 billion in the third quarter. After all, even a high-priced deal will usually boost per-share earnings, if it is debt-financed.

Buffett closed out his annual letter with a shout out for the two men, who were both elected to Berkshire's board of directors last month.

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"Each has been with Berkshire for decades, and Berkshire's blood flows through their veins", Buffett wrote.

He admitted that the struggle in finding a "sensible purchase price" had "proved a barrier to virtually all deals" previous year.

Besides the statistics, here are two things we learned (or did not learn) from Buffett's letter to shareholders.

The Oracle of Omaha made a winning 10-year bet with Protégé Partners in December 2007 that the S&P 500 would outperform a basket of fund of hedge funds. Buffett said investors need "an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals".

"It is a bad mistake for investors with long-term horizons - among them, pension funds, college endowments and savings-minded individuals - to measure their investment "risk" by their portfolio's ratio of bonds to stocks", Buffett wrote.

Buffett, 87, also avoided dropping any hints about who will take the reins at Berkshire when he retires. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.