Berkshire Posts 114% Increase in Profit for 2000

Berkshire Hathaway Inc., the holding company run by billionaire investor Warren Buffett, reported that net profit rose 114% as investment gains more than made up for underwriting losses in its main insurance businesses.

The leap in profit marks a comeback for Buffett from the year before--which he called the worst for the firm--when underwriting losses and poor returns on investments took a chunk out of profit.

Berkshire posted its annual report Saturday on its Web site, (https://www.berkshirehathaway.com), stating net profit for 2000 of $3.33 billion, or $2,185 per share. That compares with $1.56 billion, or $1,025 per share, in 1999.

The 2000 figure was largely made up of realized investment gains--which the firm notches up when it sells stocks or bonds--of $2.39 billion. The year before, Berkshire reported similar realized gains of $886 million.

The Omaha-based holding company--whose main business is insurance but also has subsidiaries in a range of “old-economy” sectors, from furniture to jewelry to plane leasing--said profit excluding the realized gains was $936 million for 2000. That compares with $671 million in 1999.

Berkshire’s stock, which has never been split in Buffett’s 36 years in charge, closed at $71,100 on Friday on the New York Stock Exchange. The stock has risen 74% in the last year from its 52-week low of $40,800.

Berkshire, which spent about $8 billion on eight acquisitions last year, is “eager and ready for even larger” ones, Buffett said in his annual letter to shareholders.

Buffett, who called the prospects for the stock market “far from exciting,” also said he’s been buying high-yield bonds of a few issuers and high-grade, mortgage-backed securities.

“We see our equity portfolio as only mildly attractive,” Buffett said in the letter. “There are no ‘bargains’ among our current holdings. We’re content with what we own but far from excited by it.”

Buffett’s assessment is a sobering one for investors looking for a rebound in the stock market, analysts said. Buffett, known for his record of successful investing, was ranked as the fourth-richest person in the U.S. last year by Forbes magazine.

During 2000, Buffett said, Berkshire sold “nearly all of our Freddie Mac and Fannie Mae shares,” and it bought 15% positions in several mid-size companies. Berkshire increased its investment in American Express Co. to about 151.6 million shares from about 50.5 million a year ago.

The company’s investments in Coca-Cola Co. and Gillette Co. remained unchanged at about 200 million shares and 96 million shares.

Its investment of 1.7 million shares of Washington Post Co. was also unchanged. Berkshire cut its stake in Wells Fargo & Co. to 55 million shares from about 59.1 million.

“We own stocks in some excellent businesses, but most of our holdings are fully priced and are unlikely to deliver more than moderate returns in the future,” Buffett said.

“The report should be sobering to people looking for a bounceback in the Nasdaq,” said Keith Trauner, an analyst at Fairholme Capital Management, which owns 2,224 Berkshire shares. “Things are nowhere near what Buffett wants in terms of the climate for equities.”

Trauner said that while the climate for equities isn’t bright, Berkshire’s operating units are producing a tremendous amount of cash that can be used for acquisitions.

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Bloomberg News and Reuters were used in compiling this report.