Warren Buffett backs stocks over bonds

  • Warren Buffett backs stocks over bonds

Warren Buffett backs stocks over bonds

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Warren Buffett's annual letter to Berkshire Hathaway shareholders, distributed over the weekend, highlighted the closing out of his ten year bet against hedge funds.

Also helping Berkshire will be the recent cut in the USA corporate income tax rate, which gave Berkshire a one-time $29.11-billion net income boost by reducing its potential tax bill on stocks it owns.

He estimated the chances of a "mega-catastrophe" this year - one causing losses of at least US$400 billion - at 2 percent.

After Apple and Wells Fargo ($29.3 billion), Berkshire Hathaway's next biggest holding is considerably smaller, with $20.7 billion in Bank of America shares.

Berkshire's cash and cash equivalents rose to $116 billion at the end of the year.

Buffett said he expects he'll eventually find a good use for a big chunk of that cash, but he may have to wait for a downturn in the economy.

'Once a chief executive hungers for a deal, he or she will never lack for forecasts that justify the purchase, ' he said.

Last month, Berkshire announced its new health care initiative with Amazon and JP Morgan. Mr Buffett, one of the richest men in the world, opposed the plan.

Buffett answered that he has been a seller of the stock near $29 per share, which was attached to the warrants.

"Buffett's positivity is very powerful and important to understand as you navigate your own career, " Toth says.

Buffett said his $3-billion investment in preferred warrants at a 10=percent coupon generated a profit.

The change also meant that Berkshire's gain in net worth during 2017 was $65.3 billion, which increased the per-share book value of both its Class A and Class B stock by 23 percent.

He says nobody can predict these bad years and that it's a fool's errand to try to time markets.

Known to fans as "the Oracle of Omaha", Buffett, 87, has suggested US stocks are probably the best bet over time, encouraging people to make easy choices and stick with them, eschewing high-fee fund managers, for instance. We held this view 50 years ago when we each ran an investment partnership, funded by a few friends and relatives who trusted us. He said Monday that Berkshire is unsurprisingly his favorite stock, but he pointed out that Apple is the stock Berkshire bought most past year.

The industrial giant hasn't approached Buffett about large divestitures, he said.

One is Wells Fargo & Co, the third-largest USA bank, which was surprisingly ordered this month by the Federal Reserve to curb asset growth while it tries to rebound from scandals over how it treated customers.

"We made only one investment decision in 10 years (selling a bond investment and buying Berkshire stock that owned a diversified group of solid businesses ) ..."