Buffett expected to tout passive investing in Berkshire annual letter

By Jonathan Stempel

NEW YORK (Reuters) - Warren Buffett, widely considered one of the world's best investors, is likely to tout the merits of passive investing this weekend to readers of his annual letter to Berkshire Hathaway Inc shareholders.

The letter, slated for release around 8 a.m. EST on Saturday, will probably focus on familiar themes for the 86-year-old Buffett, with many single-spaced pages reviewing Berkshire's businesses and managers, Wall Street, the economy and perhaps even politics.

"The letters are written as much for sophisticated financial people as for people in high school," said Andy Kilpatrick, author of "Of Permanent Value: The Story of Warren Buffett." "It's a fun read, and when you get through it, you think, 'Wow, I could be doing better with my life and my investing.'"

Buffett believes most stock investors are better off with low-cost index funds than paying higher fees to managers who often underperform. He told Fortune magazine he expects to write "a lot" about passive investing. (http://fortune.com/2016/12/05/warren-buffett-donald-trump-election/)

Berkshire itself might seem anomalous, with shares of the Omaha, Nebraska-based conglomerate having generated a roughly 2 million percent gain in Buffett's nearly 52 years at the helm.

In 2016, Berkshire's stock price rose about 23.4 percent, easily outpacing the market, though most investors who bought its stock in recent years have achieved closer to market-average returns.

Kilpatrick expects Buffett to discuss Precision Castparts, an aircraft parts maker that Berkshire bought last January for $32.1 billion, its biggest acquisition.

Buffett is likely to discuss other Berkshire businesses, such as insurance and the BNSF railroad, and shower praise on Berkshire managers, perhaps including investing deputies Todd Combs and Ted Weschler.

Combs alerted Buffett to Precision Castparts, and Buffett may discuss what drove Berkshire's unexpected, multi-billion-dollar investments in Apple Inc and the four biggest U.S. airlines.

Buffett may also focus on his desire to spend Berkshire's huge cash pile after Kraft Heinz Co , which Berkshire partly owns, on Sunday scrapped a bid to buy food rival Unilever Plc that Berkshire might have helped finance.

U.S. President Donald Trump may also be a focus for Buffett, who was a vocal supporter of Hillary Clinton.

Buffett alluded elliptically to Trump in last year's letter, bemoaning the "negative drumbeat" from presidential candidates talking down U.S. economic prospects.

Berkshire is also expected to report fourth-quarter results. Analysts expect operating profit of around $4.5 billion, or $2,717 per Class A share, down from $4.67 billion last year, Thomson Reuters I/B/E/S said.

(Reporting by Jonathan Stempel in New York; Editing by Jennifer Ablan and Dan Grebler)