Berkshire Hathaway Inc. is bringing in $100 million in cash a week after raising rates and capitalizing on rivals' financial woes. Berkshire is expected to report an 11-fold rise in fourth-quarter earnings tomorrow to $717.50 a share, according to a Thomson First Call analysts' survey.
``The company is in a sweet spot,'' said Matt Sauer, a portfolio manager at Oak Value Capital Management, which owned $336 million of Berkshire shares as of December. ``Things have never been so good in the last 15 years.''
After cleaning up Berkshire's insurance troubles by vetting unprofitable policies, Buffett, 72, needs new investments to put his cash to work and keep the company growing.
The world's second-richest man -- who has earned Berkshire shareholders an average 23 percent annual return since 1965 by buying stakes in undervalued companies -- considers stocks too expensive and hasn't purchased a company since September. Berkshire's growing pile of cash, which stood at $10.4 billion as of Sept. 30, is earning less than 1 percent. His biggest investments in 2002 may have been high-yield, high-risk debt known as junk bonds.
Berkshire's insurance units, including General Reinsurance Corp. and National Indemnity Co., are gaining from a surge in prices after Sept. 11, their AAA credit ratings and rivals' falling capital.
The property and casualty insurance industry has shrunk by a quarter to $520 billion of invested capital since 2000, according to a study by Swiss Reinsurance Co., a Berkshire rival that cut its dividend for the first time since 1906 after two years of losses.
``Buffett's the kind of guy who might do nothing for a quarter, or two or three, and then the next quarter spend $10 billion,'' said Henry Berghoef, head of research at Harris Associates, which manages about $30 billion. ``He's always going to do it on his timetable.'' |
