Tags: Warren Buffett | Economy | Berkshire Hathaway | Growth

Buffett Seeks 'Big Chunks of Earning Power' for Berkshire

By    |   Monday, 03 March 2014 07:13 AM

Investor Warren Buffett says the economy continues the steady improvement that began in fall of 2009 and he remains optimistic about the future.

Buffett appeared on the business cable channel CNBC Monday morning after releasing an upbeat annual letter to his Berkshire Hathaway shareholders over the weekend. Buffett is chairman and CEO of the Omaha, Neb., conglomerate.

Buffett says the reports he gets from Berkshire's 80-odd subsidiaries in a variety of industries show that the economy is growing at a moderate rate.

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He notes that there's been little change in the growth rate since 2009, despite swings in investors' mood.

But Buffett says he doesn't make investment decisions based on the economy. He says he focuses on the prospects of the business in which he's investing, and the price.

Buffett said that he preferred to keep buying large operating businesses to build the company for the future.

"Our preference at Berkshire is to keep buying big operating businesses," the billionaire investor said. "In terms of building Berkshire for the long term, we just like adding earning power, big chunks of earning power."

However, he added that stock holdings were "generally for very long term."

Buffett released his annual letter to shareholders on Saturday, in which he signaled that he plans to make more large acquisitions - so-called "elephants" - for Berkshire Hathaway.

Buffett has become an American icon who has built Berkshire over decades until it now owns dozens of businesses spanning industries from ice cream to insurance and employing more than 330,000 people.

Regulators are weighing whether Berkshire Hathaway should be considered a systemically important financial institution, or one that is too big to fail, Bloomberg reported earlier this year.

"We've heard absolutely nothing from the people in charge of what's called SIFI," Buffett said on CNBC.

In a wide-ranging CNBC interview:

  • Buffett says it's clear that railroad tank cars carrying crude oil need to be updated because oil from certain regions has the potential to be more dangerous than previously thought. Buffett owns BNSF railroad and a manufacturer of tank cars. Buffett says the crude oil from the Bakken oil field in North Dakota and Montana and the Eagle Ford oil field in south Texas has proven more volatile than anticipated. That volatility may have contributed to several fiery derailments in the past year, including one in Lac-Megantic, Quebec, last summer that killed 47 people. New safety rules being drafted by federal regulators may not be completed until later this year.
  • Buffett says the rate of disasters that Berkshire's insurance companies see hasn't changed because of extreme weather He said that he hasn't made any change in the way he calculates the likelihood of a catastrophe because of climate change. Berkshire owns several insurance and reinsurance funds and often has to pay significant claims when natural disasters strike. Buffett says insuring against hurricanes in the United States has been extremely profitable in the past five years because few storms have made landfall. Strong insurance results helped Berkshire earn $19.48 billion last year on $182.15 billion revenue. That's up from earnings of $14.82 billion on $162.46 billion revenue in 2012.
  • Buffett said that his successor will come from within the company. "A successor will be from within the company," Buffett said. Buffett, 83, has resisted publicly naming a successor, a worry for investors who wonder how much longer the billionaire will be at the helm at Berkshire.
Editor’s Note: Free Video — ‘Rogue Calendar’ Could Turn 490% Profits

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Investor Warren Buffett says the economy continues the steady improvement that began in fall of 2009 and he remains optimistic about the future.
Warren Buffett,Economy,Berkshire Hathaway,Growth
Monday, 03 March 2014 07:13 AM
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