Warren Buffett’s annual letter: Berkshire got a hefty gift from new tax code

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Warren Buffett’s annual letter: Berkshire got a hefty gift from new tax code – Feb. 24, 2018









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Investing legend Warren Buffett published his annual letter on Saturday, and it came with some of the usual trimmings: sage advice and reflections on the past year’s success.

Buffett told investors that Berkshire Hathaway (BRKB)made a $65.3 billion net gain in 2017 — but “only $36 billion came from Berkshire’s operations.”

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The rest was a gift from the new U.S. tax code.

“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 went on to extol Berkshire’s investing methods. Careful, slow and steady has gotten the firm this far — and that’s the course it’ll stay on, he said.

He noted that Berkshire didn’t go on a buying “frenzy” and acquire a bunch of companies last year, mostly because there were no desirable options that came at a “sensible” purchase price.

“[P]rices for decent, but far from spectacular, businesses hit an all-time high” last year, he wrote.

“[Investing partner] Charlie [Munger] and I believe that from time to time Berkshire will have opportunities to make very large purchases,” Buffett wrote. “In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.”

Buffett also gave the final details of a 10-year long bet he made against hedge funds in 2007. That ended last year, and Buffett — who bet slow, steady gains by the S&P 500 would beat out hedge funds over the decade — won with flying colors.

All told, the S&P 500 had an overall gain of 125.8% while the group of hedge funds — which have never been publicly named — gained just 27%.

Buffett has long been highly critical of the high fees charged by hedge fund operators.

“Performance comes, performance goes. Fees never falter,” he wrote.

CNNMoney (New York) First published February 24, 2018: 8:54 AM ET

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