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Holly LaFon
Holly LaFon
Articles (8379) 

Ruane Cunniff Comments on Berkshire Hathaway

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March 06, 2018 | About:

Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) posted a second straight year of flattish look-through earnings, as earnings comparisons were affected by higher-than-normal catastrophe losses and the redemption of $10 billion worth of high-yield preferred shares issued around the time of the financial crisis by Wrigley, Dow and Bank of America. Book value received a strong boost from the new tax law, which meaningfully reduced the deferred tax liability, and investments per share grew strongly due to a 20%+ increase in the insurance float and strong price appreciation by several of Berkshire’s larger stock holdings, including Apple, Bank of America and American Express. In October, Berkshire agreed to buy 80% of the largest truck stop operator in the US, Pilot Flying J.The two-step nature of the deal— the second step will take place in 2023— means that the deal will not make a meaningful dent in the company’s cash hoard, which was over $109 billion at the end of the third quarter. The largest opportunity to build intrinsic value would come from an acquisition that uses up most of this cash.The current frothy market environment presents a challenge for putting large sums to work at good returns. However, Berkshire is, as always, well positioned to take advantage of the next market disruption.

From Ruane Cunniff (Trades, Portfolio)'s Sequoia Fund 4th Quarter 2017 Manager's Commentary.

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