Berkshire Hathaway, the investment company run by Warren Buffett, has reported a record $19.5 billion profit for 2013, up from $14.8 billion in 2012.
Warren Buffett wrote to shareholders: “On the operating front, just about everything turned out well for us last year – in some cases very well.”
However, Berkshire Hathaway underperformed the S&P 500 share index for the fifth year in a row.
The growth in the company’s book value – the company’s assets minus its liabilities and Warren Buffett’s preferred measure of Berkshire’s performance – was 18.2% in 2013, while the S&P 500 rose 32.4%.
Warren Buffett said that was to be expected when the S&P performed well.
“We have underperformed in 10 of our 49 years, with all but one of our shortfalls occurring when the S&P gain exceeded 15%.”
He added that the fund had outperformed the stock market between 2007 and 2013 and that through a full six year cycle he expected to do that again.
“If we fail to do so, we will not have earned our pay,” he wrote.
Warren Buffett, ranked fourth on the Forbes rich list, pointed to a strong performance in the firm’s insurance, rail and energy businesses for the increase in profit.
These include the auto insurer Geico, General Reinsurance, Burlington Northern Santa Fe railroad and the electric utility MidAmerican Energy.
Berkshire Hathaway increased its stake in the US companies Coca-Cola, American Express, IBM and Wells Fargo but reduced its ownership in the UK retailer Tesco – to 3.7% from 5.2%.
Warren Buffett did acknowledge he had made mistakes in some of his investments in the manufacturing, service and retail industries, some of which saw “very poor returns”.
“I was not misled: I simply was wrong in my evaluation of the economic dynamics of the company or the industry in which it operated,” he said.
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