New York. — Warren Buffett assured shareholders of his Berkshire Hathaway Inc. that he has plenty of ways to deploy cash after posting record earnings in 2013.
In his annual letter, Buffett highlighted how Berkshire’s energy unit will seek another takeover after a US$5,6 billion acquisition, and he explained why a US$12,3 billion investment to help take HJ Heinz Co private was a template for future deals.

The Berkshire chairman and chief executive officer also discussed subsidiaries’ appetite to spend billions of dollars on smaller transactions, as well as equipment and plants.

“Though we invest abroad as well, the mother lode of opportunity resides in America,” Buffett wrote in the letter posted on March 1, referring to his company’s capital spending, which climbed to a record US$11,1 billion last year.

Berkshire’s ability to deploy the gusher of cash produced by dozens of subsidiaries is a top concern for Buffett (83) almost five decades after he took control of the company.

His stock picks and acquisitions created a business that generates more than US$1 billion of profit a month. Omaha, Nebraska-based Berkshire doesn’t pay a dividend and seldom buys back its own stock, which means Buffett and his deputies need to find other uses for the capital.

One area where Berkshire can invest is through its Mid-American Energy unit. Buffett acquired most of the business in 2000. Since then, it has snapped up gas pipelines and US utilities and committed billions of dollars to wind- and solar-power projects. In 2013, MidAmerican bought NV Energy, the largest electricity provider in Nevada.
“NV Energy will not be MidAmerican’s last major acquisition,” Buffett said.

Focusing on energy investment makes sense, given how much cash Berkshire produces, said James Armstrong, president of Henry H. Armstrong Associates, which oversees about US$500 million including Berkshire shares.

“The problem Berkshire faces in the next 20 years is intelligent capital allocation of all that cash coming in,” he said. — Bloomberg.

You Might Also Like

Comments

Take our Survey

We value your opinion! Take a moment to complete our survey