OMAHA, Neb. – Investor Warren Buffett says last year was “subpar” for his company because Berkshire Hathaway’s value trailed the overall market, but shareholders will likely be pleased with the 45 percent increase in profit Buffett delivered.
Buffett sounded optimistic in his annual letter that was released Friday even though 2012 was only the ninth time in the past 48 years that Berkshire’s book value per share failed to outpace the S&P 500.
The legendary investor also confessed that the two investment managers he hired over the last few years left Buffett in their dust, largely because he didn’t make a big acquisition last year.
Berkshire’s chairman and CEO had considerably more good news than bad to offer, and Buffett offered more explanation about the company’s recent newspaper purchases and its opposition to paying derivatives.
Berkshire’s net income soared in 2012 to $14.8 billion, up from $10.3 billion the previous year, but most of the increase came from paper gains on its investments and derivative contracts.
Without those gains, Berkshire’s operating earnings advanced 17 percent to $12.6 billion, up from the previous year’s $10.8 billion. Nearly all of its major business groups performed well in 2012, with the insurance units that include Geico and General Reinsurance leading the way.
“We still have plenty of cash and are generating more at a good clip,” Buffett wrote. “So it’s back to work; Charlie (Munger) and I have again donned our safari outfits and resumed our search for elephants.”