Berkshire profit advances 15% to $6.29 billion on investments

Berkshire has been a major beneficiary of the rally in stocks since Trump was elected US president

Warren Buffett’s Berkshire Hathaway said fourth-quarter profit rose 15 per cent as investment gains climbed.

Net income climbed to $6.29 billion, or $3,823 a share, from $5.48 billion, or $3,333, a year earlier, the Omaha, Nebraska-based company said Saturday in a statement. Operating earnings, which exclude some investment results, were $2,665 a share, compared with the average $2,717 estimate of three analysts surveyed by Bloomberg.

While Buffett is widely known as a gifted stock picker, Berkshire derives most of its income from the businesses he’s bought during his five decades running the firm. Its dozens of subsidiaries include auto insurer Geico, railroad BNSF, a network of auto dealerships, retailers and electric utilities.

The 86-year-old billionaire keeps adding to the mix. Last year, he completed deals for battery maker Duracell and Precision Castparts, a supplier to the aerospace industry, helping to boost profit in his company’s manufacturing segment.

Buffett tells investors to focus on the earnings from his stable of operating businesses, rather than one-time gains or losses on Berkshire’s securities portfolio. That’s because results can fluctuate widely on investments and derivatives contracts that he entered years ago.

In the fourth quarter, Dow Chemical converted Berkshire’s $3 billion preferred stake to more than $4 billion of common stock. The investment dates to the chemical maker’s 2009 takeover of Rohm & Haas, a transaction that Buffett helped finance.

Berkshire has been a major beneficiary of the rally in stocks since Donald Trump was elected US president. Class A shares have climbed 15 per cent since November 8, bringing the company’s market capitalisation above $400 billion for the first time.

Buffett, meanwhile, ramped up his criticism of Wall Street, saying investors should “stick with low-cost index funds.”

“When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients,” Buffett said in his annual letter to shareholders. “Both large and small investors should stick with low-cost index funds.”